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GIst Congress) 

2d Session J 


SENATE 


Document 

No. 290 


CIVIL-SERVICE RETIREMENT 

GREAT BRITAIN 

AND 

NEW ZEALAND 


BY 

HERBERT D. BROWN 

* 


Prepared under the direction of 

CHAS. P. NEILL 

Commissioner of Labor 



January 17,1910.—Referred to the Committee on Public Expenditures 
and ordered to be printed 


WASHINGTON 

GOVERNMENT PRINTING OFFICE 
1910 











r 



61 ^r S 1 SENATE { D NO UM 290 NT 


CIVIL-SERVICE RETIREMENT 

GREAT BRITAIN 

AND 8 y 

NEW ZEALAND 

HERBERT D. BROWN 


Prepared under the direction of 

CHAS. P. NEILL 

Commissioner of Labor 



January 17,1910.—Referred to the Committee on Public Expenditures 
and ordered to be printed 


WASHINGTON 

GOVERNMENT PRINTING OFFICE 
1910 









In the Senate of the United States, 

April 5, 1910. 

Ordered, That 1,000 copies of Senate Document No. 290, Sixty-first Congress, second session, entitled 
"Civil-service retirement in Great Britain and in New Zealand,” by Herbert D. Brown, be printed, with 
corrections, for the use of the Committee on Civil Service and Retrenchment. 

Charles G. Bennett, 

^ Secretary. 



18 1910 

(.# '% 






35 


LETTER OE TRANSMITTAL 


Department of Commerce and Labor, 

Office of the Secretary, 
Washington, January 13, 1910. 

Sir: In pursuance of Senate resolution of January 11 , 1910, direct¬ 
ing this department to furnish, as soon as practicable, “such infor¬ 
mation as may now be in the possession of the Bureau of Labor on the 
subject of foreign and domestic retirement plans for employees of 
government civil service and in the service of industrial and trans¬ 
portation corporations/’ I have the honor to transmit herewith 
reports relating to civil-service retirement in Great Britain and in 
New Zealand. 

The Bureau of Labor now has in course of preparation reports 
covering civil-service retirement systems in Austria-Hungary, Canada, 
France, Germany, New South Wales, and other foreign countries, and 
also a report covering existing provisions for retirement for public- 
school teachers and other municipal employees, and for employees of 
railroads in the United States. These reports will be transmitted at 
as early a date as practicable. 

The forthcoming Twenty-third Annual Report of the Bureau of 
Labor, which will be available within a few days, covers quite fully 
old-age retirement systems in force in industrial and transportation 
companies in this country. 

Respectfully, Ben. S. Cable, 

Acting Secretary. 

Hon. James S. Sherman, 

President of the Senate, Washington, D. 0. 


3 







































CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 











































































































































CONTENTS. 


Page. 

Letter of transmittal. 3 

Civil-service retirement in Great Britain, by Herbert D. Brown: 

Summary. 11 

Superannuation provisions before 1810.. 16 

Through life offices, sinecures, pluralism, and substitute schemes. 16 

Through funds created in various departments from fees and taxes.... 18 
Through funds created in the excise and customs by deductions from 

salaries. 20 

Superannuation act of 1810—first general law, a provision for free pensions. 21 
Report of committee on public expenditures, 1808, the basis for act 

of 1810. 21 

Main features of the act. 23 

Superannuation act of 1822. 24 

Treasury minute of 1821 establishing principle of deductions from 

salaries the basis for act of 1822. 24 

Main features of the act. 25 

Repeal of the act. 25 

Second period of free pensions, 1824-1829. 26 

Report of select committee on public income and expenditure, 1828, 

recommending reestablishment of the system of deductions. 26 

Treasury minute of 1829 reestablishing system of deductions. 28 

Superannuation act of 1834. 30 

Scale of deductions and superannuation allowances. 31 

Comparison of schemes of 1822 and 1834. 32 

Select committee of 1856. 34 

Grievances presented by committee of civil servants. 34 

Three general grounds of complaint against act of 1834. 39 

(1) Dislike of distinctions between different classes of civil serv¬ 

ants. 39 

(a) Pensions paid chief officers of state and members of legal 

establishments compared with those paid other civil 

employees. 40 

( b ) Pensions paid employees whose appointments antedated 

1829 compared with those paid other civil employees.. 44 

(2) Dislike of pension scale and forfeiture of contributions. 45 

(a) Forfeiture provision objectionable as a form of tontine... 46 

(b) Forfeiture provision especially unjust in cases of clerks 

dying in the service. 48 

(c) Forfeitable deductions together with inadequate salaries 

a bar to life insurance. 51 

(d) Free pensions desired with compulsory deductions for 

purpose of life insurance. 54 


7 





























8 


CONTENTS. 


Civil-service retirement in Great Britain, by Herbert D. Brown—Continued. 

Select committee of 1856—Continued. Page. 

Three general grounds of complaint against act of 1834—Continued. 

(3) Distrust of actuarial soundness of plan embodied in act of 

1834. '57 

(a) Flat-rate assessments considered inequitable and possi¬ 

bly inadequate. 59 

( b) Accrued liabilities possible cause of insolvency in case of 

fund. 65 

Defense of act of 1834 by men responsible for its enactment. 68 

Defense of wisdom of providing superannuation allowances. 70 

Investigation of actuaries proved deductions inequitable and inade¬ 
quate. 70 

Resolutions of the committee condemning system of deductions and 

recommending revision of salaries. 72 

Superannuation commission, 1857. 73 

Commission’s reasons for advocating a superannuation system. 73 

Commission’s objections to a contributory scheme. 75 

Recommendation that deductions from salary be abolished. 76 

Refusal of the commission to recommend an insurance fund. 77 

Indifference of the commission to actuarial phases of the problem.... 78 

Indifference of the commission to cost of free pension scheme. 80 

Repeal of the twenty-seventh section of the superannuation act of 1834, 

1857. 80 

Bill for repeal introduced by Lord Naas. 80 

Bill opposed by the ministry. 82 

Debate on the bill. 85 

Vote on the bill. 92 

Text of the repeal. 93 

Analysis of the vote. 94 

Superannuation act of 1859. 95 

Bill embodied minor recommendations of superannuation commission. 95 

Bill introduced and defended by the Government. 97 

Debate on the bill. 100 

Main features of the act. 104 

Select committee of 1873. *... 105 

Testimony showing— 

Value to the public service of a superannuation system. 106 

Compulsory retirement at a given age advisable. 107 

Cost of maintaining free pension system. 108 

Pension charge reduced by reducing number of pensionable clerks. 109 

Development of idea that pension is a substitute for part of salary. 109 

Committee’s recommendation of compulsory retirement at a given age. 110 

Playfair commission, 1874. Ill 

Optional retirement after twenty years’ service proposed and rejected. Ill 

Select committee of 1885. 112 

Committee’s recommendation of a contributory pension scheme. 112 

Ridley commission, 1886. 113 

Growth of the deferred-pay argument. 113 

Abolition of pensions proposed by Sir Robert Hamilton in favor of sav¬ 
ings scheme through accumulation of deferred pay. 114 

Approval of Sir Robert Hamilton’s proposal expressed by officers of the 

Treasury. 117 

Assumption that postponed charge is made by the State to pay pensions 
accepted by Sir Reginald Welby. 118 






































CONTENTS. 9 

Civil-service retirement in Great Britain, by Herbert D. Brown—Continued. 

Ridley commission, 1886—Continued. Page. 

Confusion in Sir Reginald’s mind as to amount of postponed charge... 119 

Assumption that postponed charge is made by the State to pay pensions 

accepted by Sir Herbert Maxwell. 120 

Confusion in Sir Herbert’s mind as to amount of postponed charge.... 123 

Disapproval of Sir Robert Hamilton’s proposal expressed by Mr. 

Mo watt. 123 

Confusion in public mind regarding Mr. Mowatt’s testimony as to 

amount of postponed charge actually made by the State. 125 

Approval of Sir Robert Hamilton’s proposal expressed by other high 
officials. 126 

(1) Would prevent pensions being charged to posterity. 126 

(2) Would facilitate dismissal of inefficient employees. 127 

Approval of Sir Robert Hamilton’s proposal expressed by civil serv¬ 
ants . 130 

Growing cost of civil pensions. 133 

Report of the commission. 134 

Rejection of Sir Robert Hamilton’s proposal. 135 

Recommendation that deductions be made from salary to be re¬ 
turned on separation from service but forfeited on acceptance of 

pension. 135 

Minor recommendations. 137 

Criticism of the commission’s chief recommendation. 139 

Superannuation act of 1887. 141 

Summary of law under superannuation acts of 1834, 1859, 1887. 143 

Courtney commission, 1902. 147 

Appointment of commission due to “deferred pay committee”. 147 

Growth in cost of civil pensions since Ridley commission. 148 

Relation between cost of pensions and salary charge confused with 

amount of postponed charge made by State to pay pensions. 150 

Request of civil servants that theoretical contributions be funded. 155 

Request of civil servants for insurance out of surplus theoretical con¬ 
tributions . 156 

Fact of postponed charge established but amount not determined .... 158 

Request of civil servants that amount of postponed charge be deter¬ 
mined . 160 

Voluntary insurance organizations maintained by civil servants. 161 

Per cent of salaries paid for life insurance by civil servants. 162 

Testimony of commission’s actuary, showing necessity of provision for 

refund of contributions. 163 

Report of commission. 165 

Pensions acknowledged to be “ deferred pay ”. 165 

Theoretical deductions from salary held to be only sufficient for 

pension. 166 

Funding of theoretical contributions held to be not justified. 166 

Recommendation that pensions be reduced one-quarter and differ¬ 
ence given in insurance and cash. 166 

Minority report of commission adverse to any change. 168* 

Workmen’s compensation act, 1906. 171 

Superannuation act, 1909. 173 

Main features of the present law. 173 

Discussion of the act in Parliament. 175 

Conclusions. 181 






































10 


CONTENTS. 


Page. 


Appendix I. Superannuation act of 1834.. 188 

Appendix II. Superannuation act of 1859.. 195 

Appendix III. Superannuation act of 1887.. 198 

Appendix IV. Warrant regulating grant of gratuities, etc., under section 1 of 

act of 1887 .. 201 

Appendix V. Scheme of compensation in case of injury to government workmen. 203 
Appendix VI. Superannuation act of 1909. 205 







CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


BY HERBERT D. BROWN.® 

SUMMARY. 

The British Government has been experimenting for over a century 
with different schemes for solving the problem of superannuation in 
the civil service. 

The first general act dealing with the subject of superannuation 
in all the offices of the Government was passed in 1810. From a 
very early period, however, superannuation funds had existed both 
in the Customs and the Excise departments. After 1810 those funds 
were appropriated by the Government and paid into the exchequer, 
and a general system obtained of granting superannuation allowances 
to the civil service out of the revenues of the country, without the 
existence of any superannuation fund. This system continued in 
force for twelve years. 

The expenditures for pensions increasing very rapidly, Parliament 
passed an act in 1822 which readopted the liberal scale of super¬ 
annuation allowances of the year 1810, but with the provision that 
deductions should be made from the salaries of those employees of 
the civil service receiving more than £100 ($486.65) per annum. The 
deductions were formed into a fund, and when a civil servant died in 
office or when he resigned or was removed from office without receiv¬ 
ing a retiring allowance, the whole amount of his contributions was 
repaid to him. The law also provided that half of the superannua¬ 
tion allowances granted after that period should be paid from the 
fund so created and that the other half should be paid from the Con¬ 
solidated Fund. This scheme was not given a fair trial, for only 
two years later, in 1824, Parliament repealed the act and ordered that 
the sums which had up to that time been deducted be paid back. 

From 1824 until 1829 followed a second period during which pen¬ 
sions were granted by the State, without deduction from the salaries 
of civil-service employees. 

In 1829 the Treasury, accepting the contention that it had no 
right to tax existing members of the service, but desirous of lessening 
the pension charge, passed a minute directing that contributions 
should be paid by all those who might afterwards be appointed to the 

a Mr. Brown desires to give credit to Harriet Connor Brown for valuable assistance 
in the collection of historical data. 


11 



12 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


civil service. The deductions from salary were per cent from 
salaries not exceeding £100 ($487) per annum and 5 per cent from 
those exceeding that amount. This was understood to be a provi¬ 
sional measure, subject to the final decision of Parliament. 

The Superannuation Act of 1834 gave parliamentary sanction to 
this Treasury minute of 1829, and from 1829 to 1857 the contributory 
system of granting superannuation allowances was in force for all 
who entered the civil service subsequent to August 4, 1829. This 
act contained no express direction for the creation of a superannua¬ 
tion fund and it made no provision for the return of contributions in 
case of death or resignation before the contributor had received a 
retiring allowance. Owing to the fact that the contributions of the 
employees were turned into the general exchequer instead of being 
funded and that no account was kept of the amounts thus collected 
and the amounts returned in the shape of pensions, it was not known 
whether the contributions were adequate in the aggregate to meet the 
expenditure for pensions, or whether they were inadequate. An 
impression prevailed that they were more than sufficient and that 
the Government was, therefore, making a profit out of its employees. 
In view of the fact that the salaries were felt to be inadequate, this 
impression created widespread discontent in the service. This dis¬ 
content was deepened by the fact that the law required forfeiture of 
contributions in the case of all employees save those who lived to the 
pensionable age. It was calculated that only one of every seven 
employees lived and remained in the service to that age. The fact 
was bitterly resented that many employees contributed for years to 
their pensions but, dying in harness, or soon after retirement, had to 
forfeit all or nearly all they had thus set aside, while their families 
were perhaps left in want. The fact, too, that pensions were paid 
those who had entered the service prior to August 4, 1829, without 
deductions being made from their salaries, and on a more liberal 
scale than that allowed the general body of the service, was another 
cause of discontent. Because of these various inequities and dis¬ 
criminations the dissatisfaction of the service with the provisions of 
the act came in time to be very intense. 

In 1846 a large number of civil employees formed themselves into 
an association for the purpose of bringing their grievances to the 
attention of Parliament. This association was in existence for about 
ten years, during which time it worked out various data and classi¬ 
fications which it laid before a select committee of the House of 
Commons appointed in 1856 to consider the regulations respecting 
the grant of superannuation allowances to members of the civil 
service. Besides desiring that the scale of pensions should be made 
more liberal, and that pensions should be granted free by the State, 
one branch of this committee of civil servants was desirous that 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 13 

compulsory deductions should continue to be made from salaries, 
but that they should be used to create a mutual insurance fund. 

The Select Committee took testimony from a great number of 
public officials and clerks and also engaged the services of two actua¬ 
ries to investigate the question of the sufficiency of the deductions 
made from the salaries of the civil servants to meet the pensions 
provided under the Act of 1834. To the surprise of the public gen¬ 
erally, since an impression to the contrary had prevailed, the actua¬ 
ries reported that the contributions of the civil servants were not 
adequate to meet the charges to which the public was liable under 
the Act of 1834. In other words, had the deductions from salaries 
been funded from the first, the fund would, by that time, have been 
hopelessly insolvent. 

Before the report of the actuaries had been submitted, however, 
the Civil-Service Superannuation Commission, which succeeded the 
Select Committee, had recommended the abolition of the contribu¬ 
tory system on the ground of, its inequities and the consequent dis¬ 
satisfaction of the civil employees with its provisions. Section 
XXVII of the Superannuation Act of 1834, providing for deductions 
from salaries, was accordingly repealed in 1857. 

Following this repeal, the Superannuation Act of 1859 was passed. 
It repealed most of the Act of 1834 and established a system of 
uniform free pensions for all persons employed in the “ permanent 
civil service of the State.” The scale of pensions established was 
that of one-sixtieth of salary for every year of service, with a maxi¬ 
mum allowance of forty-sixtieths. Retirement on a superannuation 
allowance was permitted at the age of 60, or in case of mental or 
physical infirmity after ten years’ service, but no power was given 
the State to compel retirement at any age. In cases of infirmity 
when the period of service had been less than ten years, a gratuity of 
one month’s pay for each year of service was given. The desire of 
the civil employees for the creation of an insurance fund was ignored. 
As regards the main body of pensionable civil employees the scheme 
inaugurated in 1859 has remained substantially unaltered down to 
the present year (1909). 

The Superannuation Act of 1887 and the Workmen’s Compensation 
Act of 1906 have made supplementary provision for the award of 
pensions and gratuities to various classes of government employees 
not provided for by the Act of 1859. There are also special acts 
relative to the pensions of judges, diplomatic and consular officers, 
colonial governors, police and constabulary, elementary-school teach¬ 
ers, etc. Except in the case of the elementary-school teachers, who 
have a contributory fund, these pensions have been paid out of the 
public treasury. No special funds are set aside for the purpose, but 
Parliament votes from year to year the amount required. 


14 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


Although it might be supposed that the establishment of a straight 
pension system would have been entirely satisfactory to the em¬ 
ployees themselves, the evidence submitted to various select com¬ 
mittees and special commissions shows that such was not the case. 
The theory gradually gained ground—especially after the investi¬ 
gation of the civil establishments made by the Ridley Commission in 
1886-1888—that the pensions were taken into account in fixing 
salaries, and that the salaries were accordingly less than they would 
be had no pension system been adopted. This theory was based 
on the contention that pensionable members of the civil service are 
paid less than nonpensionable members. The Ridley Commission 
recommended that a deduction of 5 per cent of salaries be set aside 
to form a savings account, but the recommendation was not acted 
upon. 

A committee of employees, which took the name of the Deferred 
Pay Committee, was organized, and as a result of their agitation, the 
Courtney Commission was appointed in 1902 to investigate the 
grievances of the civil employees. The latter held that not only 
were their salaries lower than they would have been had the pension 
system not been adopted, but that the amount withheld from their 
salaries was more than sufficient to pay the pensions. They thought 
at first that they had high Treasury authority for believing that from 
16 to 20 per cent was withheld from salaries to pay pensions. Know¬ 
ing that that per cent of pay is considerably more than had been 
found necessary in industrial pension systems for the payment of 
retiring allowances, they asked that life insurance be given them in 
addition to the pension and as an offset to the excessive deductions 
from salary. Inquiry developed the fact that the current idea that 
from 16 to 20 per cent was deducted from salaries was based on an 
erroneous interpretation of statements made by Treasury officials. 
The employees then urged that an investigation be made to ascer¬ 
tain just what percentage of salary was being deducted for that pur¬ 
pose. This request was not granted, the commission holding arbi¬ 
trarily that no more than the amount necessary to pay pensions 
was withheld from salaries. They recommended, therefore, that life 
insurance be granted the employees, not in addition to the pension, 
but in substitution of part of it. 

The recommendations of the Courtney Commission were submitted 
by the Deferred Pay Committee to a plebiscite of the civil service, 
with the result that 80 per cent of the service declared themselves 
in favor of the change. On September 20, 1909, a law was accord¬ 
ingly passed reducing the amount of the pension by one-quarter, 
and substituting in its place a provision for a cash payment in case 
of death or retirement from the service. Instead of receiving a 
pension of one-sixtieth of salary for each year of service rendered, 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 15 

as formerly, the civil employee of England will receive, henceforth, 
a pension of one-eightieth of salary for each year of service. Since 
the maximum period of service which is recognized is forty years, it 
follows that the pension is reduced from a maximum pension of 
two-thirds pay to a maximum pension of one-half pay. To balance 
this reduction of pension several new benefits are given. Any 
employee who retires after two years’ service gets, in addition to the 
pension (if any) or the gratuity (if any), an additional lump-sum 
allowance of one-thirtieth of his annual salary for every year he has 
served. In case an employee dies after five years’ service, a cash 
sum, as a life insurance, equal to one year’s pay, is given to his legal 
representatives. If an employee dies after he has retired from the 
service, before receiving the whole of a year’s pay, the State pays 
the difference to his family. 

This last legislation must be regarded as a recognition of the 
employees’ contention that, in fixing salaries, the practice lias grown 
up of taking into account the value of the pension. The civil pension 
in England has come to be the equivalent of a deferred annuity paid 
for by the difference between the salary actually received and the 
salary that would be received were there no pension. Hence, in 
practical operation, the pension system of England is virtually a 
contributory system. ( a ) 

The cost of the British system is interesting. Under date of Feb¬ 
ruary 19, 1909, the British Foreign Office made the following state¬ 
ment, in reply to an inquiry sent out by the Department of Com¬ 
merce and Labor concerning Great Britain’s pension plan for civil 
servants: 

Speaking generally, the greater part of the clerical establishment of 
the civil service (except persons engaged in routine duties such as 
copying) is pensionable, while in the arsenal, dock yards, etc., pension 
rights are, as a rule, confined to the directing posts, and a proportion 
only of the lower staff. The number of existing civil pensioners is 
approximately 22,500, and the amount voted for pensions, etc., in 
respect of the civil service proper (i. e., exclusive of provision for ele¬ 
mentary school-teachers, constabulary, and police), in the current 
year, was £ 1,842,260 ($8,965,358). The great majority of existing pen¬ 
sioners are men, the employment of women in the public service in 
anything like considerable numbers being of comparatively recent date. 

What the total noneffective charge is, including pensions for the 
established employees and gratuities for the nonestablished, besides 
the pensions payable to teachers, constabulary, police, members of 
the judiciary, and other public servants provided for under special 
acts of Parliament, is not given. Since, however, the total charge for 
pensions, gratuities, and compensation allowances was stated in 
1902-3 to the Courtney Commission to be approximately two and a 


a See Conclusions, p. 181. 



16 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

half million pounds ($12,166,250), it is safe to estimate that it is no 
less than that in 1909. That it will grow less is very unlikely, for 
the history of civil pensions throughout the world shows that there 
is always a constant tendency to extend the benefits of a pension 
system to new classes of public servants. 

SUPERANNUATION PROVISIONS BEFORE 1810. 

From an early date it seems to have been taken for granted in 
Great Britain that the Government was under a moral obligation to 
make provision for its civil employees in case of retirement from 
office by reason of age or infirmity. Such an opinion was rendered 
by the commissioners of inquiry appointed in 1786 by the act of 25 
Geo. 3, c. 19, to inquire into the fees, gratuities, perquisites, and 
emoluments received in certain public offices. It was indorsed in 
the report of the three principal Secretaries of State to the Lord 
President', dated February 23, 1795, in the following words: 

When an officer either from age or infirmity is obliged to retire, we 
agree with the commissioners in opinion that a decent provision ought 
to be afforded him, and we do not see that any objection can arise to 
its being paid out of the general fund; but with respect to the extent 
of such provision, we think it ought to be decided on a consideration 
of the merit and service of such an officer, and not by any fixed rule. 

Pensions to officers of the Crown, especially those who had held 
high and important positions in the civil service for a shorter or 
longer period, had accordingly been granted from time to time. 

Through Life Offices, Sinecures, Pluralism, and Substitute 

Schemes. 

Not, however, until the beginning of the nineteenth century was 
any general system of superannuation established. Before that 
time, recourse was had to inconvenient devices for securing the funds 
necessary for the payment of old age and infirmity allowances. 
Public officers who retired from the civil service were provided for in 
various ways. In some cases the practice of granting certain offices 
for life dispensed with the necessity of any such provision. The case 
of an employee in the Treasury, who had become superannuated 
without retirement, was noted in the following language by the 
commissioners of 1786: 

The attendance of one of the chief clerks having been of late years 
dispensed with on account of his age and infirmities, the duty has 
devolved entirely upon the remaining three, who have been found 
sufficient for the execution thereof. ( a ) 

In some cases the existence of sinecures proved a haven for the 
worn-out and inefficient. In the opinion of the Commissioners of 

a Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 152. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


17 


Inquiry, for instance, the establishments of the Home Secretary, with 
an office force of sixteen, and the Foreign Secretary, with a corps of 
fifteen, might have been maintained with half the number. They 
said: 

From what we have been able to collect, the general business of 
the office is scarcely sufficient to furnish full employment for the 
clerks at present borne upon the establishment, and we consider 
their present number as rather to be justified by the propriety of 
having fit persons always in readiness upon any extraordinary 
pressure of business than from the degree of employment which the 
office ordinarily affords. If they were reduced to eight in each 
department, Your Majesty’s service might not suffer from such 
reduction. ( a ) 

Only the official records can give any adequate idea of the extent 
of pluralism in the British civil service during the eighteenth century. 
Provision was made for old age by officers in active service through 
saving and investment of incomes derived from offices, the duties of 
which were executed by deputies. For years almost every officer of 
rank in the Treasury had some provision of this kind. In other 
departments also there were many receiving double salaries. The 
receiver-general of the Post-Office was a commissioner of the Salt 
Office. The superintending president of the Post-Office was searcher 
of the customs for the port of Chichester. The receiver and registrar 
of the Hackney Coach Office was comptroller of the Tea Warehouse 
under the Board of Customs. Nor was the system confined to the 
higher appointments. A clerk in the Penny Post-Office was also 
deputy to the husband of the Four-and-a-half per cent duties in the 
Customs. A messenger in the Bye-letter Office was a stamper in the 
Stamp Office. Concerning this state of things the commissioners of 
1786 had this to say: 

So far as these emoluments (alluding to those arising from sinecures) 
have been applied to increase the incomes of officers inadequately 
paid, and to form a provision for them on retirement, but so far 
only they have been of use, and, while officers remain on their present 
footing, are, perhaps, in some degree, necessary. But we think that 
an establishment may, and ought in wisdom, to be found, in which 
such a species of emolument would be superfluous and redundant; 
an establishment by which every public officer should be paid for 
his services, not under false pretenses and in uncertain measure, 
but openly, and in proportion to the service he performs; an estab¬ 
lishment which should entitle him to a provision upon retirement, 
not dependent upon caprice or accident, or arising from the per¬ 
petuation of abuses, but known and certain, free from the competition 
of individuals, or the animadversion of the public. ( * 6 ) 


a Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 151. 

& Idem, p. 154. 

35885—S. Doc. 290, 61-5 


- 2 * 




18 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


The practice, at that time common, of charging the salaries of 
public officers with retiring allowances to their predecessors a form 
of what is now advocated in the United States in certain quarters 
under the name of the 11 substitute plan”—afforded still another 
means of providing for retired employees. The following case was 
noted in the Treasury by the Commissioners of 1786: 

The keeper of the papers has a salary of £400 [$1,946.60] a year, 
reduced by the one shilling duty, and an allowance of £40 [$194.66] 
to his deputy, to £340 [$1,654.61], the whole of which he pays to 
Thomas Pratt, esq., during life, who resigned office in his favor in 
the month of January, 1783. (°) 

A similar and more flagrant case recorded by the commissioners in 
their report on the Post-Office Department was that of the packet 
agent at Dover, who granted allowances to his predecessor and received 
them from his successor in another office. 

He has a salary of £150 [$729.98] a year, reduced by taxes, etc., 
to £123, 13s. 8d. [$601.90]; he has an allowance of £200 [$973.30] 
a year for providing extra boats when the service requires, reduced 
by agency in London to £194, 18s. 8d. [$948.64], and an allowance 
of £10 [$48.67] a year for stationery; he likewise derives certain 
emoluments from agency on the passage, which is at the rate of 10s. 
in every guinea on what is called ‘allowed freight;’ the average of 
which, from the 15th July 1775, to the 5th January 1787, being 
eleven years and a half, was £941, 18s. [$4,583.76], making the 
average of his net annual receipt £1,270 10s. 4d. [$6,182.97], which 
he now receives for his own use; but previous to the death of Mr. 
Barham, which happened in October last, he paid to him £800 
[$3,893.20] a year, as a compromise for the clear annual income of this 
office, which by order of the Postmaster-General, dated 16th Novem¬ 
ber 1774, he was directed to pay to him during his life; to indemnify 
him for such payment, he was to receive from Mr. Lees, his successor 
in Ireland, the clear annual income of his office, as secretary to the 
Post Office there, during the life of Mr. Barham, which was likewise 
compromised for a net payment of £750 [$3,649.88] during the life 
of Mr. Barham, and of £150 [$729.98] annually after his death; 
which engagement is now in force, and will add so much to his 
annual receipt. ( b ) 

Through Funds Created in Various Departments from Fees 

and Taxes. 

The power then existing in different departments of granting pen¬ 
sions chargeable upon various funds, such as fee funds and contin¬ 
gencies, offered another means of providing for the superannuated. 
The commissioners of 1786 found three instances in the Treasury in 
which allowances had been charged to the fee fund, which proved 
inadequate for the strain thus put upon it. The record is as follows: 

a Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 152. 

b Idem, p. 153. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


19 


One of the three superannuated clerks, Thomas Tomkins, retains 
only his salary of £100 [$486.65] out of the civil list. The two others, 
Frederick Reynolds and James Royer, have allowances by order of a 
minute of the Treasury Board of 16th December 1783, of £300 
[$1,459.95] a year each, charged on the fee fund, besides which the 
latter has a salary of £200 [$973.30] a year out of the Customs, having 
been formerly a clerk in the Revenue Office, and his name still remain¬ 
ing on that establishment; but Mr. Royer, notwithstanding frequent 
applications, has not yet received any part of his allowance of £300 
[$1,459.95] a year out of the fee fund, this fund not having proved 
sufficiently productive for that purpose, in which case the minute 
directed that it should be paid out or any other fund the board might 
think fit. («) 

From taxes levied on official salaries an annual sum was obtained 
which formed a substantial addition to the national revenue and was 
regarded as an offset to the amount paid out by reason of superan¬ 
nuation in office. The taxes so levied appear to have been three in 
number. A land tax, amounting in certain cases to a deduction of 20 
per cent and originally intended to operate as an equitable income 
tax on real and personal property, was still charged on some classes of 
salaries. A duty of 6d. in the pound (termed the civil-list duty) and 
a duty of Is. in the pound were also imposed. The amount produced 
in 1796 from these two last-named duties was no less than £73,991 
($360,077.20). These duties were not collected, of course, without 
expense. The receivers were remunerated by a poundage; "one 
class of servants having, it must be presumed, been overpaid, it was 
necessary to pay others in order to cover the excess.” In cases 
where salaries were avowedly not more than sufficient, it was pointed 
out by the commissioners that such taxes only recoiled upon the 
public “by creating new claims to consideration, which must in 
justice be satisfied,” and they recommended, therefore, that the salaries 
of officers should be exempted from all taxes and duties. 

As afterwards pointed out by the Commissioners of 1857, any such 
mode of retiring servants as those just described, was “obviously 
most objectionable in principle, and liable to great abuse in practice, 
both as regards due economy in the public expenditure, and the fair 
and equal remuneration of public servants. Indeed, it may be 
doubted whether such a state of things could have continued so long, 
had not the whole number of civil servants been at that time small, as 
compared with the amount of our present establishments. In time, 
however, it became apparent that, if a provision were to be made for 
retired servants, the objectionable means hitherto employed for that 
purpose had become quite inadequate; as well from the great increase 
in the number of civil servants, as from the effects of financial reforms 
in drying up the sources from which means had been obtained.” 

a Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 152. 




20 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


Through Funds Created in the Excise and Customs by Deduc¬ 
tions from Salaries. 

An attempt was made, therefore, early in the nineteenth century, 
to establish a system of granting superannuation allowances, and to 
make it apply to the rank and file of the civil service as well as to 
the high officials. From a very early period superannuation funds 
had existed both in the departments of Excise and of Customs. 
The Excise fund, which was originally called “The Excise Charity 
Fund,” was established by a Treasury minute, dated February, 1686, 
by a deduction of 3d. in the pound on the salaries of all “genera] 
riders, general supervisors, collectors, surveyors, gaugers, and clerks.” 
In the disposal of the money the following rules were to be observed: 

First. No officer who had not served seven years was to receive 
any sum of money or pension, unless disabled by accident. 

Second. The pensions were to vary according to the grade of the 
officers, the maximum being £30 ($146) and the minimum £15 ($73). 

Third. No officer was to be allowed a pension, if, from any other 
source, he possessed an income equal to the pension assigned to 
his grade. 

An act (49 Geo. 3, c. 96) was passed in 1809, which granted to 
officers incapacitated by age or infirmity, after ten years’ service, 
three-fourths of their salary, taken on the average of the last seven 
years. The same proportion of last salary was granted to officers 
disabled by accident, irrespective of length of service, but it was 
provided that no such superannuation should be granted to an 
officer in receipt of less than £180 ($875.97) per annum. 

The Customs fund appears to have existed at least as early as the 
year 1708. It was confined at first to the inferior officers of the 
service. The rate of deduction was 3d. in the pound and the fund 
was increased by the fines imposed on officers for breach of discipline. 
Gradually the benefit of the fund was extended to classes higher in 
rank than those for which it had originally been formed. A Treas¬ 
ury warrant of 1779 added landing surveyors, landing waiters, and 
other superior officers. Fees belonging to 196 offices, abolished in 
1798 by the 38th of Geo. 3, c. 86, were turned in to the superannu¬ 
ation fund. 

The first formal proceedings of the Government looking toward 
the establishment of a general system of superannuation allowances 
are found in Treasury minutes of 1802, 1803, and 1807. The first 
minute, dated July 30, 1802, granted allowances ranging from £100 
($486.65) to £200 ($973.30) on retirement in consequence of physical 
infirmity, under the name of compensation, to a few classes of officers 
of the Customs. No regulations were made as to age or length of serv¬ 
ice. The second minute, dated the 10th of August, 1803, was passed 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


21 


because the Lords of the Treasury had discovered that the allowances 
granted the previous year did not bear a fair proportion to the 
emoluments of the respective offices. They fixed, therefore, the 
sums which were to be taken as the annual incomes of the several 
grades and then prescribed a graduated scale of allowances, accord¬ 
ing to which one-third of the salary was allowed to officers who had 
served ten years and were reported incapable of executing their duties; 
one-half was allowed after service of from ten to twenty years, and 
two-thirds after twenty years, to officers retiring at less than sixty 
years. In the case of officers more than sixty years of age two-thirds 
of salary was allowed after only fifteen years of service. The third 
minute, dated November 7, 1807, extended the arrangement to 
numerous other classes of officers of the Customs, and in this position 
the matter stood at the passing of the general act of 1810. 

SUPERANNUATION ACT OF 1810. 

Report of Committee of 1808 the Basis for Act of 1810. 

In the year 1808 a report was made by the Committee on Public 
Expenditures on the subject of the pensions, sinecures, and rever¬ 
sionary grants paid out of the public revenues, which led to the first 
general enactment on the subject of superannuation. Although there 
was at that time no regular system of superannuation, except in the 
Customs and Excise, as explained above, a large number of retired 
allowances, included under the general head of “pensions,” came 
under the notice of the committee. The entire want of fixed rules 
governing the grant of superannuation allowances was noted and 
deplored by them. Their attention was drawn particularly to a 
large amount of “dead wood” in some offices, the practice having 
arisen, in case of deficiency of the fee fund, of carrying pensioners on 
the regular civil list. This meant that much of the sum voted for any 
office for current expenses was not paid out in the form of salaries to 
those carrying on the work, but was spent for pensions to those no 
longer able to work. The committee held that “annual allowances 
ought not to be granted generally, and without special reasons, to 
persons retiring from official situations,” and that when pensions 
were granted in any office the accounts should be kept entirely 
separate from the salary account. 

In view of the loose way in which provision was made for the pay¬ 
ment of superannuation allowances, the committee recommended 
that a stricter account be kept of pensions granted and the reasons for 
their bestowal. They suggested the expediency of limiting allowances 
to a certain proportion of the former salary and laid stress on the 
principle that duration of service should be taken into consideration 


22 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


in fixing the amount of the allowance. Their recommendations are 
contained in the following extract: 

Under all these circumstances your committee do not hesitate in 
submitting to the House, that all allowances in the nature of pensions, 
which are not strictly superannuations, should be classed under their 
proper head, and paid at the exchequer; preserving, at the same time, 
entries of such pensions, together with the circumstances under which 
they have been granted, on the establishment of the offices in which 
the services have been performed. 

It may be also expedient to limit the sums in which allowances may 
be applied to cases of superannuation, so as not to exceed a certain 
proportion of the former salary. 

The regulations under which superannuations are granted in the 
Customs deserve the attention of the House, as uniting a due con¬ 
sideration toward long and meritorious service, with a just atten¬ 
tion to economy. 

By a resolution of the House of Commons of Ireland, 7th April 
1784, no yearly allowance was permitted to be placed on incidents 
in cases of superannuation, except for officers who shall have served 
forty years without censure, or officers who shall have received a 
wound or hurt in the service, amounting to a total disability, or 
for widows of officers who shall have lost their lives in the service of 
the revenue; but by a subsequent revision of that resolution, 26th 
July 1793, twenty-five years were substituted instead of the term 
of forty years, as being sufficient to answer the purposes of the said 
resolution respecting the placing on incidents any yearly allowance 
for superannuated officers of the revenue, who have already served, 
or shall have served, the said term of twenty-five years without 
censure. 

These general, unqualified expressions, have been, perhaps, liable 
to misconstruction, as if they were calculated to convey a sort of right 
of superannuation after twenty-five years of service; whereas it is to 
be presumed that it never would have been the intention of the House 
of Commons to countenance a new claim on the part of the officers, 
but, on the contrary, to impose a restraint upon executive govern¬ 
ment, from granting any such allowances even to superannuated offi¬ 
cers, unless where they had served meritoriously the prescribed num¬ 
ber of years, or had otherwise been incapacitated in the public serv¬ 
ice, as described in the resolution. 

With regard to the salary and emoluments of each separate depart¬ 
ment, the public ought unquestionably to be served as cheaply as is 
consistent with being served with integrity and ability; but it must 
be recollected that what makes office desirable in the higher depart¬ 
ments is not the salary alone, but the consequence and consideration 
attached to it, the power of obliging friends, and of creating depend¬ 
ents; and in the lower degrees the chance of gaining advancement by 
industry and talent. The principle of gradually increasing salaries 
after certain periods of service, and at fixed intervals, if they are not 
made too short, is highly to be approved, as holding out a due encour¬ 
agement to diligence and fidelity. In all cases of superannuation, 
duration of service should be an essential requisite, and even then 
regard should be had to the condition of each individual, as to his 
ability of continuing the official labors, and to his situation in life 
from other causes. 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


23 


In many instances, where allowances have been granted as com¬ 
pensation for the loss of office, or upon the plea of superannuation, 
the persons who have obtained them have, at subsequent periods, 
been appointed to other offices, in both which cases it is obvious that 
the allowances ought to have ceased. 

The true principle applicable to all offices is, that public money 
should not be granted without reference to duty ; and all exceptions 
whatever ought to be justified under the special circumstances attend¬ 
ing such case.( a ) 

Main Features of the Act. 

As a result of the report of the Committee on Public Expenditure 
and their recommendation that the regulations under which super¬ 
annuations are granted in the Customs should be considered by the 
House, “as uniting a due consideration toward long and merito¬ 
rious service, with a just attention to economy,” the Act of 1810 
(50 Geo. 3, c. 117) was passed. The principal features of this act 
were the provision for an annual statement of the increase and dimi¬ 
nution of public salaries, pensions, and allowances, the prohibition of 
the practice of charging superannuations or compensations on the 
expenses or funds of any office without the concurrence of the Treas¬ 
ury, and the separation of military and naval pensions from civil 
allowances in the annual estimates of the Army, Navy, and Ordnance. 
Provision was also made that in offices having a fee fund, compensa¬ 
tion and superannuation should be chargeable in the first instance 
on such fund, the deficiency, if any, being made good, in the offices 
of the Secretary of State, the Privy Council, and the Treasury, out of 
the civil list; in other cases by a parliamentary vote. The scale of 
remuneration was similar to that prescribed by the minute of 1803 
for retired officers of the Customs, with the addition that any officer 
over 65 years of age might receive a pension of three-fourths of salary 
in case he had served forty years or more, or the whole of salary in 
case his length of service had been fifty years or more. 

Since this act made pensions to Customs and Excise officers payable 
out of the public revenues, a Treasury minute was passed March 26, 
1811, directing that the accumulated Customs fund, consisting of 
about £165,000 ($802,972.50) stock should be paid into the exchequer. 
Two acts were passed in the year 1812 directing that the Excise fund, 
consisting then of £73,900 ($359,634.35) three per cent consols, the 
value of which was £45,324 ($220,569.25), should also be paid into 
the exchequer. ( 6 ) 

The superannuation funds which existed in the Customs and 
Excise having been appropriated by the Government and paid into 

a Report on the Operation of the Superannuation Act. 1857. Appendix XII, pp. 
154, 155. 

5 Report on Civil Service Superannuation. 1856. p. 2. 



24 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


the exchequer, there existed then under the Act of 1810 a general 
system of granting superannuation allowances to the civil service out 
of the revenues of the country without the existence of a superannu¬ 
ation fund of any kind. This act continued in force for twelve years, 
and during that period pensions were granted from the Consolidated 
Fund without any abatement from salaries, and entirely at the cost 
of the public. 

The Act of 1810 was undoubtedly intended to operate as a check 
upon the grant of pensions. It had, however, exactly the opposite 
effect. The act made no regulations to check retirements from office. 
The liberality of the pension scale established was really a tempta¬ 
tion to seek retirement. It should be noted that although one-third 
was fixed as the maximum allowance for ten years’ service, the Treas¬ 
ury was left at liberty, as soon as the ten years had been exceeded by 
the smallest interval, to grant one-half. Furthermore, the superan¬ 
nuation was to be calculated upon the salary of which the individual 
was in receipt at the time of retirement, not on the average of that 
received during a certain number of years. A great increase in the 
pension charge resulted. The charges of the years 1810 and 1820 for 
superannuation allowances, including compensations for loss of office, 
in the purely civil departments were, respectively, £94,550 ($460,- 
127.58) and £291,068 ($1,416,482.42), and those of the civil branch 
of the Ordnance Department had increased from £27,916 ($135,- 
853.21) to £54,718 ($266,285.15).(°) 

SUPERANNUATION ACT OF 1822. 

Treasury Minute of 1821 the Basis for Act of 1822. 

The next important step in the history of English superannuation 
measures was taken by the Treasury. In a minute of August 10, 
1821, it laid down a principle that proved to be extremely influential 
in the subsequent legislation on the subject. This was a period of 
marked reduction in public expenditure following the war, and it 
was the spirit of retrenchment which animated the Treasury minute. 
“My Lords are of opinion that it is essentially necessary that some new 
regulations should be adopted, with a view of limiting this branch of 
the public expenditure in future (that is, the superannuation allow¬ 
ances), and they are of opinion that the mode of regulation which 
seems in all respects most eligible, is, to require that the individuals 
themselves who may hereafter enjoy the benefit of superannuation 
allowances, should be called upon to contribute to a superannuation 
fund, to be administered under the direction of their Lordships.” 
This Treasury minute contained recommendations for a plan along 
the lines afterwards established by the Act of 1822. On January 8, 

a Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 157. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 25 

in the following year, another minute was issued recommending a 
general revision of the salaries of the civil establishments. 

Main Features of the Act. 

Based on these two minutes, an act of Parliament was passed in 
August, 1822 (3 Geo., 4, c. 113), which granted the same liberal scale 
of retiring allowances authorized by the Act of 1810 but required con¬ 
tributions from all civil servants whose salaries exceeded £100 
<$486.65) per annum. This act required that upon salaries between 
£100 ($486.65) and £200 ($973.30), 2J per cent should be deducted; 
that upon salaries of upwards of £200 ($973.30), 5 percent should be 
deducted, to the extent of the regulated salary authorized by the 
minute of January, 1822; and that for any salary which any officer 
then holding office might receive above the regulated amount, 10 
per cent should be paid. It was also directed that the abatements so 
made from salary should be formed into a fund, to be carried to the 
credit of the commissioners, for the reduction of the national debt at 
the Bank of England. Provision was made that, if any civil servant 
died in office, the whole amount of his contribution was to be paid to 
his legal representatives. Even after his resignation or removal 
from office, his contribution was paid back to him, provided he had 
not received any benefit from the fund. 

The object of this act was thus explained by the Chancellor of 
the Exchequer: 

The persons who, in ordinary cases, were to receive these allow¬ 
ances, it was intended to make contribute to a fund out of which 
such allowances in future were to issue. That arrangement would 
operate as something like reduction of salaries; but it would be a 
case of infinitely less hardship to make persons contribute in the 
active part of their lives to a fund which, in the decline of life and in 
retirement, would be a provision for them, than suddenly, and at one 
blow, to cut down their salaries without holding out any correspond¬ 
ing advantage. (°) 

Repeal of the Act. 

This law held less than two years, for on June 24, 1824, it was 
repealed by an act of Parliament (5 Geo., 4, c. 104), which directed 
that all superannuation allowances granted after that date were to 
be paid from the Consolidated Fund and all contributions received 
under the previous act were to be returned to the contributors. 
There is a Treasury minute, dated January 25, 1824, which contains 
the details of that repayment. The sum then in hand, after pay¬ 
ing the few pensions during the interval, amounted to £107,800 
($524,608.70), which was repaid in the proportions there specified. ( b ) 

a Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 158. 

6 Report on Civil Service Superannuation. 1856. p. 3. 



26 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

The reason for the repeal of the Act of 1822 was the plea on the 
part of the civil servants that compulsory deductions from their 
salary constituted a violation of contract on the part of the Gov¬ 
ernment. The debates which occurred in Parliament on the subject 
indicate that the repeal was made entirely on that ground. The 
system of deductions was not popular with either Parliament or the 
civil service. 

In the meantime the charge of superannuation allowances con¬ 
tinued to increase. In 1827 it amounted, including compen¬ 
sation allowances, in the purely civil departments to £484,081 
($2,355,780.19); in the civil branch of the Ordnance to £64,364 
($313,227.41).(°) 

SECOND PERIOD OF FREE PENSIONS (1824-1829). 

Report of Select Committee of 1828, Recommending Reestab¬ 
lishment of System of Deductions. 

In the year 1828 the Select Committee on Public Income and 
Expenditure made important recommendations in regard to the 
salaries and pensions of civil employees. This committee inquired 
into the salaries given to the clerks in the India House, the Bank 
of England, two insurance offices, and one of the principal banking 
houses of London, and compared them with the salaries granted 
clerks in the civil service. As a result of this inquiry they stated 
in their report on salaries that ‘‘there does not appear to be any 
fixed system of superannuation allowances in commercial houses, 
and although some such allowances are given, the amount of them 
is small.” They then proceeded to indorse the principle of deduc¬ 
tions from salary for the purpose of creating a superannuation fund 
in the following language: 

The committee are aware that there is not a strict analogy between 
the duties performed by clerks in public offices and those in commer¬ 
cial establishments; still, as far as comparison can be made, it appears 
that the salaries in the Ordnance Department admit of diminution. 
At present, without precluding themselves from hereafter advising a 
further reduction on a general and systematic principle, should it 
appear proper on more accurate investigation, they confine them¬ 
selves to a recommendation to revert to the principle laid down in 
the minute of the Treasury in 1821, of making these salaries sub¬ 
ject to a charge for forming a superannuation fund, the details of 
which they intend in the course of a few days to submit to the House 
in a separate report on superannuation allowances, half-pay, and 
pensions. ( b ) 

In the committee’s report they accordingly recommended the 
reestablishment of the system of deductions. They alluded with 


a Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 158. 
b Idem, p. 159. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 27 

approbation to the principle laid down in the Treasury minute of 
August 10, 1821, that pensions should be provided by making deduc¬ 
tions from the salaries of the persons entitled to them. The select 
committee proposed that deductions should be made from all 
salaries, both of those who had taken service previously to that date 
and of those who might afterwards enter the service. They recom¬ 
mended that those already in the service should be pensioned on 
the then existing liberal scale (the difference between the value of 
their pensions and the value of their contributions to be made up 
from the public purse), but that those who might afterwards enter 
the service should be given pensions equivalent only to the value 
of the deductions from their salaries so that the public might not 
eventually have to bear any part of the expense of these allowances. 
They pointed out that the loss occasioned the public by the repeal 
of the Act of 1822, which they considered to have been an admirable 
measure, was no less than £500,000 ($2,433,250). They stated that 
from 1822 to the end of 1827 the superannuation and compensation 
allowances had increased in annual amount from £331,746 ($1,614,- 
441.91) to £484,081 ($2,355,780.19).(«) 

The Chancellor of the Exchequer accordingly introduced a bill 
founded upon this report, and intended to give effect to the recom¬ 
mendations contained in it. He introduced it in language which 
showed plainly enough that the main interest of the Government in 
connection with the bill was the reduction of expenses rather than 
the establishment of a model superannuation measure, and that the 
deduction from salaries was preferred to a reduction of salaries. His 
speech is reported as follows: 

The House had appointed a committee for the purpose of revising 
the expenditure of the country; and that committee had almost 
unanimously declared that such a measure as that which he had 
introduced ought to be carried into effect. Standing in the situa¬ 
tion which he had the honor to fill, he should have been charged with 
a high degree of cowardice, if, after such a recommendation, he had 
refused to bring the measure before the House. On that account 
he was prepared to vindicate the bill, and to state the reasons on 
which the committee had come to their decision. The whole expendi¬ 
ture for the service of the country, the committee found to amount 
to twenty-one millions, and of this, five millions were appropriated 
to the ineffective service, including superannuation, pension, and 
retired allowances. The committee was anxious not to deprive the 
country of the active service of those who were engaged in the public 
departments; and they therefore turned their attention to consider 
if it were possible, without any deviation from just principle, pros¬ 
pectively to diminish the expenditure for services that were passed. 
Of the five millions which the ineffective service of the country cost, 
the committee found that nearly half a million was appropriated to 
the payment of the civil pensions, and this sum has been increased 


a Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 160. 



28 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

within a few years from £330,000 [$1,605,945] to £447,111 [$2,175,- 
865.68]. Finding that this sum was increasing so rapidly, they 
thought it their duty to recommend the measure before the House. 
He knew that the committee had balanced long between a reduction 
of the salaries, and this measure of making the officers contribute 
to their own superannuation. He, for one, opposed the reduction of 
salaries, because they had been fixed in the year 1821, after the effects 
of peace had been fully felt, and the measures for restoring the metal¬ 
lic currency had been adopted. It was better, on the whole, he 
thought, and the least likely to affect the future prospects of the 
different officers of our civil establishments, to adopt this measure 
relative to their superannuation, than to alter their salaries. (°) 

Sir Henry Parnell also stated that the opinion of the committee 
was in favor of a considerable reduction of salaries, but that they 
had taken, instead, a course much more favorable to the clerks, 
namely, that of proposing to reduce them by- a small percentage, in 
the way provided in the Act of 1822. And he added his conviction 
that “the clerks had much better consent to this arrangement than 
defeat it, and thus make it necessary to examine more closely what 
ought to be the exact reduction which the public interests- required 
to be made.” 

The bill was withdrawn, however, in consequence of an objection 
made on hehalf of the civil servants, on the same ground as before, 
that the imposition of deductions would, as regards them, be con¬ 
trary to their terms of service. Strong statements were also made 
to the effect that the salaries were not sufficiently high to bear 
deductions, although the select committee had recorded its opinion 
otherwise, as follows: 

It is obvious that in recurring to the provisions of the Act of 1822, 
the rate of salary attached to each office should be such as may be 
deemed fairly sufficient to bear the deduction which it is proposed to 
make from it; and when it is considered that the Treasury revised 
and fixed the salaries of the several departments in 1821, when the 
deductions in aid of the superannuation fund were first established, 
it does not appear that a revival of that principle would press too 
hardly at the present time, and under the present circumstances of 
the country, upon the fair emoluments of the officers and clerks who 
are now in office. ( * 6 ) 

Treasury Minute of 1829 Reestablishing System of Deductions. 

Although the bill was withdrawn, Treasury officials did not give up. 
the notion of reducing pension charges by exacting contributions 
from the civil servants. They observed that the objection which 
had been made successfully against the Act of 1822 and the proposed 
bill of 1828 that deductions from salary would mean a violation of 
the terms of contract did not apply to future entrants. They accord- 


° Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 160. 

6 Report on Civil Service Superannuation. 1856. p. 4. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 29 

ingly proceeded to issue the famous minute of August 4, 1829, direct¬ 
ing that contributions should be paid by those who might afterwards 
be appointed to the service. The text of this important minute 
reads as follows: 

My Lords have under their consideration the necessity of adopting 
some regulation, with a view to reduce, at a future period, the heavy 
charge which is now annually incurred in providing superannuation 
for such persons as are incapable, from infirmity of mind or body, of 
discharging the duties of their public situations. 

My Lords trust that they shall be enabled, at an early period, to 
make such an arrangement as shall be just to parties entering into 
the public service, while it shall ultimately lead to a large reduction 
of expense. 

My Lords therefore deem it advisable that a distinct intimation 
should be given to every individual who may hereafter enter into the 
civil service of the Crown at the time of his admission to office; that he 
will be subjected to a deduction from his annual salary and emolu¬ 
ments, and to such regulation with respect to superannuation as my 
lords may hereafter lay down. 

Let a communication therefore be made to the several offices 
hereinafter mentioned, directing them, in every case of appointment 
to office, to make such a communication to the person appointed, and 
to make a deduction from all salaries and emoluments not exceeding 
£100 [$486.65] a year at the rate of 2 \ per centum per annum, and 
from all other salaries and emoluments at the rate of £5 [$24.33] per 
centum per annum, for the purpose of providing, in such manner as 
my Lords may hereafter direct, for superannuation on retirement of 
such persons as shall hereafter enter the civil service. (°) 

In issuing this minute the Lords of the Treasury acted under the 
general financial powers entrusted to them by Parliament. This 
Treasury minute was in effect nothing more than a prospective regula¬ 
tion of the salaries of all civil servants who might enter the service 
after the date of the minute. The Treasury had always been accus¬ 
tomed to exercise the full and entire right of raising and reducing the 
salaries of the lower grades of the permanent civil service, submitting 
the salaries so revised to Parliament, at its next meeting, in the 
estimates. A minute dated June 15, 1832, directed that the fund 
realized by these deductions from salaries was to be invested in 
exchequer bills to be held subject to the disposal of Parliament, and 
it was so held till Parliament decided on the question by the Act of 
1834. After Parliament had sanctioned the deductions by that act, 
the amount of the deductions was directed by a minute of November 
14, 1834, to be stated on the face of the estimates submitted to Par¬ 
liament for the ensuing year, and to be deducted from the sum voted 
to defray the charge of superannuation and retired allowances. 

Previous to 1832 the superannuation estimate had been confined 
to the pensions of officers of certain departments which possessed no 

a Report on Civil Service Superannuation. 1856. Appendix No. 1, p. 346. 



30 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

fee funds, whereas the pensions of officers of departments possessing 
fee funds (namely, the Treasury, the offices of the three Secretaries 
of State, the Council Office, and the Board of Trade) were not sub¬ 
mitted to Parliament, though, of course, such pensions contributed to 
the deficiencies in the fee funds which Parliament had to vote. Fur¬ 
ther, some of the departments without fee funds included the pen¬ 
sions to their officers in the same estimate as their salaries. 

But in 1832 all that was changed; in the estimates of that year all 
the fee fund pensions, and most of the other pensions hitherto included 
in the votes for salaries in the other departments were brought 
together in a superannuation estimate. The cost, however, of super¬ 
annuation in the Revenue Departments, the Admiralty, the War 
Office, and the Royal Irish Constabulary was not included in the 
civil service vote, but was provided for in the votes for their depart¬ 
ments, as will be seen in the various returns showing the annual 
charges for civil pensions. ( a ) 

SUPERANNUATION ACT OF 1834. 

The last stage in this course of legislation was reached when the 
Superannuation Act (4 and 5 Will. 4, c. 24) was passed July 25, 
1834. By this act the Treasury minute of August 4, 1829, requiring 
deductions from salary was confirmed, and by it the old scale of 
pensions prescribed in the Act of 1822 was maintained as regards the 
persons who had taken office previously to the date of the Treasury 
minute of August 4, 1829, but as regards the persons who entered 
subsequently to that date, a lower scale of pensions was prescribed, 
which seemed to be calculated as equivalent to the value of the de¬ 
ductions directed to be made by the minute, according to the prin¬ 
ciple of the report of 1829. Section XXVII of the act reciting the 
minute of 1829 and adopting the precise scale of deductions laid 
down in it reads as follows: 

And whereas the commissioners of the Treasury did, by a minute 
dated the fourth day of August, one thousand eight hundred and 
twenty-nine, record their intention to adopt certain regulations with 
a view to reduce prospectively the charge incurred in providing for 
superannuation allowances, of which notice was given in the several 
public departments, for the information of those who should there¬ 
after enter the public service: And whereas in pursuance of the said 
minute, an annual abatement hath been made from the salaries and 
emoluments of the several persons who have entered the public 
service subsequent to the date thereof: And whereas it is expedient 
to continue such abatement in those cases, and to extend it to others, 
as herein after provided; Be it therefore further enacted, That from 
and after the passing of this act there shall be an annual abatement 
made, in quarterly proportions, by the proper officer in each respec- 


® See pages 41-43. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


31 


tive department, 'from the salaries and emoluments of the several 
officers and persons employed in the several civil offices and depart¬ 
ments specified in the schedule to this act, or to be specified in the 
addition authorized to be made thereto, and not within the excep¬ 
tions thereof, who have since the date of the said minute entered or 
shall hereafter enter the public service, in such manner and under 
such directions as shall from time to time be given in this respect by 
the commissioners of the Treasury or of the Admiralty, as the case 
may be, the amount of which abatement shall be according to the 
respective rates following; (that is to say,) 

Scale of Deductions and Superannuation Allowances. 

From salaries and emoluments not exceeding the annual sum of 
one hundred pounds [$486.65], an abatement after the rate of two 
pounds ten shillings per centum [2 4 per cent]; 

And from salaries and emoluments exceeding one hundred pounds 
[$486.65] five pounds per centum [5 per cent]; 

And in the cases of all persons whomsoever at present holding 
office and entitled to superannuation allowance under this act, who 
shall have been appointed to such office subsequently to the issue of 
the minute of the lords commissioners of His Majesty’s Treasury, 
bearing date the fourth day of August one thousand eight hundred 
and twenty-nine, for the future regulation of the several civil depart¬ 
ments of the public service, and who shall hereafter, upon promotion, 
obtain any increase of salary or allowances in respect of their offices, 
an annual abatement, after the like rates respectively, shall be made 
from the amount of such increase from time to time, commencing from 
the period when the same shall take place. 

The superannuation allowance to persons who had entered the 
service before August 5,1829, was, according to section IX of the act, 
as follows: 

To an officer, clerk, or person who shall have served ten years and 
upwards, and under fifteen years, any annual allowance not exceed¬ 
ing in amount four-twelfths of the annual salary and emoluments of 
his office: 

For fifteen years and upwards, and under twenty years, not ex¬ 
ceeding five-twelfths of such salary and emoluments: 

For twenty years and upwards, and under twenty-five years, not 
exceeding six-twelfths of such salary and emoluments: 

For twenty-five years and upwards, and under thirty years, not 
exceeding seven-twelfths of such salary and emoluments: 

For thirty years and upwards, and under thirty-five years, not 
exceeding eight-twelfths of such salary and emoluments: 

For thirty-five years and upwards, and under forty years, not 
exceeding nine-twelfths of such salary and emoluments: 

For forty years and upwards, and under forty-five years, not 
exceeding ten-twelfths of such salary and emoluments: 

For forty-five years and upwards, and under fifty years, not ex¬ 
ceeding eleven-twelfths of such salary and emoluments: 

And for fifty years or upwards, any annual allowance not exceeding 
the net amount of the salary and emoluments of his office. 


32 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


In contrast to these provisions was the superannuation allowance 
granted by section X to persons who had entered or who might 
enter the service subsequent to August 4, 1829: 

To an officer, clerk, or person who shall have served ten years and 
upwards, and under seventeen years, an annual allowance not ex¬ 
ceeding in amount three-twelfths of the salary and emoluments of 
his office: 

For seventeen years service and upwards, and under twenty-four 
years, not exceeding four-twelfths or such salary and emoluments: 

For twenty-four years service and upwards, and under thirty-one 
years, not exceeding five-twelfths of such salary and emoluments: 

For thirty-one years and upwards, and under thirty-eight years, 
not exceeding six-twelfths of such salary and emoluments: 

For thirty-eight years and upwards, and under forty-five years 
not exceeding seven-twelfths of such salary and emoluments: 

And for forty-five years and upwards, not exceeding eight-twelfths 
of such salary and emoluments: 

And in no case, except as hereinafter is especially provided, shall 
any superannuation or allowance exceeding two-thirds of the salary 
and emoluments of any such officer, clerk, or person be granted. 

Comparison of Schemes of 1822 and 1834. 

The Superannuation Act of 1834 was the law of the land for twenty- 
three years. It will be noted that it was in every way distinctly less 
favorable to the civil service than the Act of 1822 which, owing to 
the protests of the civil employees themselves, had been thrown out 
after only two years’ trial. 

In the first place, the scale of deductions established by the minute 
of 1829 and the law of 1834 was higher than that fixed by the law of 
1822. The scale of 1822 exempted entirely salaries under £100 
($486.65) a year, while the scale of 1829 imposed 2 \ per cent on sala¬ 
ries under £100 ($486.65) a year. The old scale of 1822 imposed 2 \ 
per cent on salaries between £100 ($486.65) and £200 ($973.30) a 
year, whereas the scale of 1829 imposed 5 per cent on those salaries. 
In only one respect was the scale of 1822 less favorable than that of 
1829 and that was in respect to the limited number of persons who 
happened in the year 1822 to have their salaries above what had 
recently been settled to be the regulated salaries of the offices, and 
who were charged 10 per cent on the excess. 

In the second place, the Act of 1822 contained specific directions 
with respect to the creation of a superannuation fund; namely that a 
fund should be created, and the account kept in the Bank of England, 
and the monies lodged in the hands of certain commissioners. The 
Act of 1834, on the other hand, contained no express direction for the 
creation of a fund. There was only a general presumption derived 
from the tenor of the act and the preliminary proceedings that the 
deductions were intended to defray the pensions of the contributors. 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


33 


The only indication which the act contained as to the intention of 
Parliament in making those deductions was found in the words, 
“with a view to reduce prospectively the charge incurred in providing 
for superannuation allowances.” Undoubtedly, it was not intended 
to keep the same strict account of the deductions as was done under 
the law of 1822, but though no fund was created, those who stood 
sponsors for the bill of 1834 spoke as if there had been, seeming thus 
to indicate that the intention of the act was to limit the use of the 
deductions to the payment of superannuation allowances. In intro¬ 
ducing the bill in the House of Commons, Sir James Graham said: “It 
was recommended by the Finance Committee in 1828, and this clause 
follows out the recommendation, that a deduction should be made in 
the salaries of all men in public offices, in order to provide a fund on 
the principle of insurance. They will pay the premiums themselves, 
and will receive the whole amount of the benefit.” And Lord Grey, 
who had charge of the bill in the House of Lords said: “In August, 
1829, a minute was made by the Lords of the Treasury of that day, by 
which it was provided, that in order to avoid the heavy charge which 
had been produced by this practice of superannuation, there should 
be in future a superannuation fund established arising out of a 
deduction of a certain percentage from the salaries of all civil officers 
who received their appointments subsequently to that time.” In 
actual practice, however, according to the testimony of Sir Charles E. 
Trevelyan, no separate account was kept of deductions or of the 
mode of appropriating them. In the sense in which a professional 
accountant would use the word “fund,” there was no fund. At first, 
the deductions were carried by the different departments to the 
credit of the votes for pensions for their respective departments, and 
after that, on a more improved arrangement of accounts, they were 
collected by the Paymaster-General, and carried to the credit of the 
aggregate annual vote for superannuations and compensations. 
Since all members of the service were pensionable but only part of the 
service—that which had entered subsequently to 1829—contributed 
to the pensions and since those contributions were not funded, it was 
not known at any time during the more than quarter of a century that 
the Act of 1834 was in force whether the contributions were adequate 
or not. The general impression prevailed that they were more than 
adequate, probably because pensions were bestowed on noncon¬ 
tributors—those who entered the service before 1829—as well as on 
contributors. 

In the third place, the Act of 1822 distinctly provided for the refund 
of contributions in case of the resignation or death of the contrib¬ 
utor before receiving a retiring allowance whereas the Act of 1834 
made no such provision. The result was that a civil servant might 
35885—S. Doc. 290, 61-2-3* 


34 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

contribute for many years to the pensions of others, and if he hap¬ 
pened to die before reaching an age or condition which permitted him 
to retire, neither he nor his family could receive any return from 
those contributions. 

While it was apparent from the beginning that the selfishness of 
those who had entered the service before 1829 had resulted in the 
passage of a law more advantageous for themselves but much less 
so for the service generally than the one first proposed, it was not 
apparent, for some time, how bad the law of 1834 really was. The 
class of public servants most vitally interested in the matter—those 
appointed since 1829—was hardly in existence. They were com¬ 
paratively few in numbers and officially less than 5 years old at the 
time of the passage of the act. They were not alert to their special 
interests as were the older civil servants, and there was no one in 
Parliament who seemed to perceive their peculiar position or who 
at least undertook to defend them. It was only as time went on and 
those who had been youths in the service became elderly men that the 
body of employees generally began to realize the essential injustice 
of the law and the unfair discriminations sanctioned by it. 

SELECT COMMITTEE OF 1856. 

Grievances Presented by Committee of Civil Servants. 

In 1846 a committee of civil servants drawn from those appointed 
subsequently to the date of the Treasury minute of 1829 was formed 
for the purpose of bringing their grievances to the attention of the 
Government. It continued in existence until 1856, working out 
various data and classifications with reference to the civil service, 
but on the appointment by Parliament of a select committee “to 
consider the existing regulations respecting the grant of superannua¬ 
tion allowances to persons who have held civil offices in Her Majesty’s 
service,” the committee of civil servants felt that it was expedient for 
them to dissolve. 

The chairman of the civil servants’ committee appeared before the 
Select Committee and testified to the dissatisfaction of the service. 
The committee of civil servants consisted of thirty deputies, repre¬ 
senting all the principal departments of the Government. Their 
complaint was twofold: That the scale of pensions was not sufficient, 
and that the abatements from the salaries were oppressive. They 
were divided in their request for increase of pensions, one faction 
requesting that the maximum scale of rates for ordinary pensions be 
increased from two-thirds to the full amount of salary, and the other 
faction contenting itself with the request for relaxation in the severity 
of the law relating to the amount of benefits. The two factions were 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


35 


agreed in considering the abatement from salaries a growing evil. 
Said Mr. Bromley, the representative of one of the factions: 

The general body of civil servants who have signed that petition, 
of 9,000 persons, agree with me, and agree with the committee with 
which I have been acting, that all those abatements ought to be 
abolished entirely for the purpose for which they are now levied. 
* * * There is this further distinction between us, that they [the 

other faction] wish to place the five per cent abatement in their own 
pockets; and those with whom I act, desire to have that abatement 
continued, if I may so speak, for the purpose of our widows and 
children; in fact, upon the principle of an insurance fund, so that 
every single man as well as every married man shall benefit by the 
abatement. (°) 

Each of these factions presented a petition to the Select Committee 
setting forth their grievances, with some variations of detail, but 
agreeing in the main line of argument. The petition of the first 
faction requesting that the maximum pension be equal to the full 
amount of salary, and that deductions from salary be abolished—in 
other words, that the petitioners be put on exactly the same footing 
as those civil employees appointed prior to the date of the Treasury 
minute of 1829—was as follows :( 6 ) 

Petition of civil servants of the Crown, whose appointments date 
subsequently to 1829. 

To the honorable the Commons of the United Kingdom of Great 
Britain and Ireland, in Parliament assembled. 

The humble petition of the undersigned civil servants of the Crown, 
whose appointments date subsequently to 1829, showeth, 

That the civil service numbers about 16,000 persons. 

That for the last 40 years a system of strict economy, by reducing 
public salaries and abolishing indirect emoluments, has so greatly 
lessened the incomes of the civil servants, that the average salary of 
the entire body is only £141 [$686.18], while that of two-thirds does 
not exceed £86 [$418.52] per annum. 

That such incomes are very inferior to those of members of the open 
professions, and, considering the social position and educational 
requirements of government servants, are barely sufficient for the 
present maintenance and future provision of their families in that 
degree of respectability which is expected of them as servants of the 
Crown. 

That previous to 1829 this reduced rate of salary was paid without 
any deduction, and the civil servant was assured of a reasonable 
pension when worn out in the public service. 

That in the year 1834, however, Government, in answer to a 
demand for still greater retrenchment, passed the Superannuation 
Act, 4 & 5 Will. 4, c. 24 (having a retrospective effect to 1829), 
which greatly reduced pensions, and levied a tax of 5 per cent on 
salaries over £100 [$486.65], and 2\ per cent on salaries under that 


a Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 80. 
b Report on Civil Service Superannuation. 1856. Appendix No. 16, pp. 461, 462. 



36 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


amount, with a view to reduce prospectively the charge for super¬ 
annuation. 

That by this act your petitioners, though compelled to contribute 
towards superannuation, can not claim it as a right, nor retire from 
the service until 65 years of age, unless incapacitated by infirmity 
of body or mind; while the utmost that they can receive is two- 
thirds of their salary should they survive 45 years’ service. 

That it has been calculated that this scale of pensions is only half 
the value of that which will be awarded to your petitioners’ fellow 
officers who entered prior to 1829, and who, though belonging to the 
same social rank, and performing the same official duties, at present 
receive their salaries in full. Moreover, although all your petitioners 
during their entire official career are thus taxed for superannuation, 
yet, as it is estimated, according to the average duration of life, that 
not more than one in ten can be superannuated, it follows that the 
contributions of the remaining nine-tenths are absolutely lost to 
them and their families. 

That oppressive and disheartening as this act has already proved, 
its effects will be greatly aggravated as the period approaches when 
its enactments, as they apply to your petitioners, come into general 
operation, because that unwillingness to retire which is often mani¬ 
fested at present by old officers who are entitled to the better scale 
of pensions will be much increased, when to do so even after 31 years’ 
service will involve, as in the case of your petitioners, a sacrifice of 
one-half of their income. 

That in the absence of strict regulations enforcing retirement, old 
and infirm men entitled to repose must be suffered to remain in office, 
to the detriment of the public service, as well as to the injury of the 
younger members of each department. Thus when the officers who 
entered before 1829 have all retired, and been succeeded by others 
subject to the tax, Government will be receiving the highest amount 
of deductions from your petitioners’ salaries, while the latter are 
receiving the least possible benefit from superannuation. 

That the tax is felt £o be the more unjust, because, while it is levied 
on the humblest salaried servant of the Crown, an exception is made 
in favor of the following, viz: ministers of State, diplomatic officers, 
judges, and other officials of the superior, county, and sheriffs’ courts 
throughout the United Kingdom, and the chief officers of many of 
the civil departments of the State. 

That, though the amount gained by the nation from this tax is at 
present only £60,000 [$291,990] per annum, yet, as it bears exclusively 
on your petitioners, who are subject to all the ordinary taxes of the 
country, it has the effect of nearly doubling direct taxation in their 
case, as compared with all other classes of Her Majesty’s subjects. 

That the principle of granting gratuitous pensions has been repeat¬ 
edly affirmed by Parliament, and is applied by the British Govern¬ 
ment to all its servants, with the exception of your petitioners; also 
by the East India Company and the Bank of England; and your 
petitioners humbly submit that it is an obligation sanctioned by 
necessity and sound policy, as well as natural justice; because when 
an officer becomes infirm after spending nearly a lifetime in the 
public service, at a scale of remuneration purposely reduced to the 
lowest rate, and which forbids the possibility of accumulating an 
independence, it is no less necessary, for maintaining the efficiency 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


37 


of that service, that he should be withdrawn when incapacitated, 
than it is due to him that that withdrawal should be upon terms 
which he may willingly accept, as involving no serious privation 
during the few remaining years of his life. 

May it therefore please your honorable House— 

1st. To amend the 10th, 11th, and 12th sections of the Act 4 & 5 
Will. 4, c. 24, and to grant to your petitioners a scale of pensions equal 
in value to that at present given to those officers who entered prior 
to 1829, but graduated upon shorter intervals and smaller fractional 
allowances, and with permission to retire after 30 years’ service, if 
60 years of age. 

2nd. To repeal the 27th section, levying the percentage tax, and 
thus leave your petitioners subject only to the ordinary taxation of 
the country. 

(9,791 signatures). 

The petition of the second faction requesting that more leniency 
in the matter of benefits be exercised, and especially that the abate¬ 
ments from salary be applied to the formation of a civil-service 
insurance fund was as follows: ( a ) 

The humble petition of the general committee of civil servants 
of the Crown employed in the several public departments of the 
State, whose appointments bear date subsequently to the 4th day 
of August 1829, showeth, 

That your petitioners have been deputed by the officers and 
clerks in their respective departments to form a general committee, 
which committee has been in existence since the year 1846, for the 
purpose of endeavoring to obtain relief from the abatements made 
from their salaries for superannuation purposes. 

That your petitioners have since that period uniformly labored 
to effect that object, supported as they have been in their view by 
the general sympathy accorded to them. 

That a petition on behalf of the civil servants of the Crown was 
presented by your petitioners to your honorable House on the 3rd 
December 1852, and a letter to the late Chancellor of the Exchequer, 
dated 7th December 1853, was laid before your honorable House 
during the last session of Parliament, forwarding the signatures of 
more than 3,000 civil servants expressing their concurrence in the 
prayer of that petition. 

That your petitioners now respectfully beg, with reference to the 
aforesaid petition, to entreat the consideration of your honorable 
House to the following statement of the position in which the civil 
servants of the Crown are placed as respects superannuations under 
the provisions of the 10th, 11th, 12th and 27th sections of the Act 
4 & 5 Will. 4, c. 24; viz: 

That the pensions granted to them have been reduced in value 
by one-half. 

That this reduction will effect a saving to the country of about 
£300,000 [$1,459,950] a year, or nearly 60 per centum of the entire 
amount of the annual charge for civil superannuations. 

That a permanent saving has also been effected, since that act 
was passed, in the annual charge for civil salaries amounting to up¬ 
ward^ of £270,000 [$1,313,955] a year. 

a Report on Civil Service Superannuation. 1856. Appendix No. 16, pp. 460,461. 



38 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


That all other classes of public servants receive gratuitous pen¬ 
sions; but that class represented by your petitioners is subjected 
to a tax of 2\ or 5 per centum on their salaries, for the purpose of 
reducing the charge to be incurred for their pensions. 

That the amounts so abated from their salaries have hitherto 
been applied in payment of the pensions of other classes of civil 
servants who are not subjected to the tax, and who are pensioned 
on a superior scale. 

That the abatements have not been formed into a separate fund 
for the individual benefit of the contributors as was intended at the 
time of passing the act. 

That the amount of abatements from salaries in excess of the 
pensions paid has already reached upwards of £750,000 [$3,649,875]; 
and, had those abatements been funded, they would by this date 
have accumulated to a surplus of £1,000,000 sterling [$4,866,650], 
producing, at the rate of only 3 per centum, the annual interest of 
£30,000 [$145,995]. 

That these abatements were imposed for the sole purpose of 
reducing the charge of civil superannuation allowances, which 
object has been, as shown above, already attained. They have, 
moreover, been ascertained to be so excessive and disproportionate, 
that, if continued, the mere interest on the surplus amount accu¬ 
mulated will, within 60 years from the present time, suffice to defray 
the entire charge of civil pensions in perpetuity. 

That civil servants can now no longer be considered as receiving 
pensions from the State, but are compelled to purchase on excessive 
terms deferred annuities, not only for themselves, but also for all 
their successors. 

That in cases of death in active service the families of the deceased 
derive no benefit whatever from the abatements made for super¬ 
annuation, but, on the contrary, the tax is even imposed after death 
upon the residue of salary paid to the legal representatives. 

That these abatements made from salaries which average only 
£141 [$686.18] a year deprive the civil servants, as a body, of the 
means of effecting insurances on their lives. There are consequently 
numerous instances of men whose energies are depressed and spirit 
weighed down by the hopelessness of ever securing an adequate 
provision for those whose subsistence depends upon their precarious 
lives, and who are thus precluded from giving their best thoughts 
and exertions to their official duties. 

Your petitioners therefore humbly pray— 

That the limited number of civil servants who are incapacitated 
for active service may be granted, as formerly, during their few 
remaining years, pensions at the expense of the State, in common 
with all other servants of the public. 

That your honorable House will be pleased to relax the severity 
of the 10th, 11th, and 12th sections of the above-mentioned act 
(4 & 5 Will., 4, c. 24), in such manner and to such extent as in the 
wisdom of your honorable House may be considered most conducive 
not only to the well-being of the civil servants, but also to the effi¬ 
ciency of the public service. 

That the abatements made from the salaries of the civil servants 
of the State, in pursuance of the 27th section of the said act, which 
have been proved to be excessive in amount and to be no longer 
required for the purposes specified therein, may be applied to the 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


39 


formation of a civil service insurance fund, and be considered as pre¬ 
miums paid for the insurance of their lives for the benefit of their 
families and representatives; upon which simple principle of insur¬ 
ance there would not be any annuitants either as widows or orphans 
chargeable upon the fund or the public, since the amount insured 
would in each case be paid over at death to the representatives of 
the deceased, whether he were married or single. 

Three General Grounds of Complaint Against Act of 1834. 

From these petitions and from the testimony given by various 
officials and clerks of the service in the course of the hearings it is 
apparent that the complaints against the superannuation scheme 
established by the Treasury minute of 1829 and confirmed by the 
Act of 1834 may be roughly classed under three general heads: (1) 
Dislike of the invidious distinctions made in the act between different 
classes of the public service; (2) discontent with the provisions of the 
act, particularly the scale of pensions and the absence of a refund in 
case of death or withdrawal from the service before reaching the age 
of superannuation; and, (3) distrust of the actuarial soundness of the 
plan. 

( 1 ) Dislike of distinctions between different classes of civil servants. 

The body of civil servants generally felt aggrieved that all other 
classes of public servants received gratuitous pensions while on them, 
the humblest-salaried servants of the Crown, a tax which they could 
ill afford was levied to meet the expenses of their superannuation. 
They saw, on the one hand, that ministers of State, diplomatic officers, 
judges, and other officials of the superior, county, and sheriffs’ courts 
throughout the United Kingdom, and the chief officers of many of 
the civil departments of the State were retired on liberal pensions 
often after only a few years’ service; and they saw, on the other hand, 
that their fellow-officers who had entered the service prior to 1829, 
individuals of the same social rank, performing the same official duties, 
received their full salaries without deduction and were retired on a 
scale of pensions about twice the value of those awarded themselves. 

The testimony of Sir Charles E. Trevelyan brought out the fact 
that particularly large pensions were paid to certain great officers 
of State appointed to their positions by reason of political favor and 
to members of the judicial establishments. Sir Charles E. Trevelyan, 
who was Assistant Secretary to the Treasury and deeply interested in 
the subject of civil-service reform, gave the committee much valuable 
information. Returns prepared by him for the Chancellor of the Ex¬ 
chequer showed that the total annual salaries of the civil establishments 
of the United Kingdom were £5,599,409 ($27,249,523.90), and the total 
annual compensations and pensions, £1,122,844 ($5,464,320.33). ( a ) 
The pensions, therefore, were to salaries in the proportion of nearly 


Report on Civil Service Superannuation. 1856. Appendix No. 2, p. 357. 



40 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

one to five, or 20 per cent, but this statement is hardly fair to the 
permanent civil service, for it covered two great divisions, one of the 
judicial establishments of the three kingdoms and the other of all other 
civil establishments. The total amount of pensions and compensa¬ 
tions of all the judicial establishments of England, Ireland, and 
Scotland was nearly 34 per cent ( a ) of the total amount of salaries, 
whereas the total amount of compensations and superannuation 
allowances of what was commonly called the “ civil service,” including 
the departments which paid contributions, was only 18 per cent of 
the total amount of salaries. It should be noted also that this 18 
per cent included the pensions paid to great officers of State, especially 
provided under the first clauses of the Act of 1834 with pensions 
much more generous than any allowed the members of the general 
body of civil servants. These pensions included £1,000 ($4,866.50) 
each after ten years’ service to Under Secretaries of State, to Clerk of 
the Ordnance, Second Secretary of Admiralty, and Secretaries of the 
India Board; those of £1,200 ($5,839.80) after five years’ service to 
Joint Secretaries of the Treasury, First Secretary of Admiralty, and Vice- 
President of theBoardof Trade; those of £1,400 ($6,813.10) afterfive 
years’ service to the Chief Secretary of Ireland and the Secretary at 
War; and those of £2,000 ($9,733) after only two years’ service to 
the First Lord of the Treasury, Secretaries of State, Chancellor of the 
Exchequer, First Lord of the Admiralty, President of the India Board, 
and President of the Board of Trade. 

(a) PENSIONS PAID CHIEF OFFICERS OF STATE AND JUDICIARY COM¬ 
PARED WITH THOSE PAID OTHER CIVIL EMPLOYEES. 

All the objections which applied to the ordinary pension list 
applied in an aggravated degree to the pensions of the great legal 
establishments, the arrangements connected with which were, in 1856, 
in the same crude and elementary state in which those relating to the 
other civil establishments were at the beginning of the century. For 
instance, there was no check upon first appointments and there was 
no limitation as to the age of entrance into the service, a matter which 
has a very important bearing upon the pension list. Officers of the 
legal establishments paid no deductions, or if they paid them, it was 
only in the case of new appointments made subsequently to the date 
of the special acts by which the establishments were regulated. 
When an ordinary civil establishment was placed by the Treasury on 
the schedule of the superannuation act, the persons belonging to it 
were made to pay up the arrears of deductions from the date of their 
appointment, supposing they were appointed subsequently to the 
4th of August, 1829; whereas under the special acts of Parliament, 
by which a few of the judicial establishments were placed under the 


This should apparently be 31 per cent. See note to statement on p. 42. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


41 


superannuation act, the deductions always commenced not from the 
date of the commencement of the service of the officer, but from the 
date of the act. 

The return prepared by Sir Charles E. Trevelyan and submitted to 
the Select Committee on March 4, 1856, showing the total annual 
salaries, compensations, and pensions of the civil establishments of 
the United Kingdom was as follows: ( a ) 

TOTAL ANNUAL SALARIES, COMPENSATIONS, AND PENSIONS OF THE 
CIVIL ESTABLISHMENTS OF THE UNITED KINGDOM. 


Total annual salaries of the civil establishments of the 

United Kingdom.£5,599,409 [$27,249,524] 

Total annual compensations and pensions. 1,122, 844 [5,464,320] 

Being in the proportion of nearly 1 to 5, or 20 per cent. 

JUDICIAL ESTABLISHMENTS. 


Court. 

Salaries. 

Compen¬ 

sations 

and 

pensions. 

England: 

Court of chancery. 

$834,614 
217,406 
177,944 
188,781 

$451,991 

76,039 

61,858 

65,206 

49,867 

15,573 

6,682 

18,157 

2,929 

119,059 

1,727 

Court of Queen’s bench. 

Court of common pleas. 

Court of exchequer. 

Court of requests. 

County courts. 

499,999 

34,187 

Court of admiralty and others. 

Marshalsea and Palace court_ . . . 

Abolished courts of record. 


Bankruptcy court. 

290,817 

40,952 

Insolvent court. 

Total, England. 

2,284,700 

869,088 

Ireland: 

Court of chancery. 

333,316 

132,719 

104,742 

112,134 

142,447 

23,593 

15,631 

28,255 

5,786 

Court of Queen’s bench. 

Court, of enmmon pleas. ... 

Court of exchequer . 

T.nrd treasurer’s re.memhraneer and others . 

Registrar of judgments . 

5,596 
9,490 
8,760 
14,599 
3,582 
19,709 
20,887 
2,433 
157,811 

Clerks of writs . . 

2,920 

'faxing nffieers jn nnmmon law business . 

Prerogative eonrt . 


Court- of appeals ...-. 


Bankrupt eonrt. . 


Insolvent, eonrt . 

5,986 

A dmjralty eonrt . 

A ssj stHP t barrj sfnrs . 

4,633 

Total, Ireland. 

925,778 

229,251 

Scotland: 

P.mirt nf sp.Qcinn .. 

284,564 
100,128 
164,415 

| 72,331 

Sheriffs of counties . 

SP» pri Qnhfit.itntfts .. 

Tntnl .. 

549,107 

72,331 



SUMMARY OF JUDICIAL ESTABLISHMENTS. 



$2,284,700 

$869,088 


925,778 

b 229,222 


549,107 

72,331 


3,759,585 

1,170,641 


— 


o Report on Civil Service Superannuation. 1856. Appendix No. 2, p. 357. 

b This amount does not agree with the total for Ireland shown above, but is the equivalent of the amount 
(£47 102) shown in the original report. No explanation is given for the discrepancy. 




































































42 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


The total amount of compensations and pensions of all the judicial establishments 
of the United Kingdom is therefore nearly 34 per cent (a) on the total amount of 
salaries. 

If the four superior courts of England and Ireland are taken separately, the per¬ 
centage is above 41 per cent, viz: 

ENGLAND. 



Salaries. 

Compen¬ 

sations. 


Court of chancery. 

$834,614 
217,406 
177,944 
188,781 

$451,991 

76,039 

61,858 

65,206 

54 per cent of the salaries. 

35 percent of the salaries. 

35 per cent of the salaries. 

34 per cent of the salaries. 

46 per cent of the salaries. 

Court of Queen’s bench.. 

Court, of common pleas. 

Court of exchequer. 


1,418,745 

655,094 


IRELAND. 


Court of chancery. 

$333,316 

132,719 

104,742 

112,134 

$142,447 

23,593 

15,631 

28,255 

42 per cent of the salaries. 

18 per cent of the salaries. 

15 per cent of the salaries. 

25 per cent of the salaries. 

Court of Queen’s bench. 

Court of common pleas. 

Court of exchequer. 



682,911 

209,926 

30 per cent of the salaries. 


OTHER CIVIL ESTABLISHMENTS. 




Compensation and superan¬ 
nuation. 

Names of offices. 

Salaries. 




Compen¬ 

sation. 

Superan¬ 

nuation. 

Total. 



House of Lords. 

$75,431 

236,093 

128,962 

19,466 

38,932 

60,831 

681,310 

153,777 




House of Commons. 

$2,920 

j 

$28,985 

$31,905 

Great officers of State: 

Class I. 

Class II. 


72,024 

72,024 

Class III... 

. 

Class IV. 




Diplomatic establishments. 


125,157 

37,706 

2,068 

2,506 

18,507 

20,488 

1,630 

125,157 

59,337 

2,068 

2,652 

20,405 

20,488 

9,928 

Treasury. 

21,631 

Privy council office. 

57,361 

190,066 

68,048 

114,723 

73,781 

41,059 

30,172 

20,026 

Board of trade and registrar of merchant seamen. 

146 

Secretary of State, Home Department. 

1,898 

Secretary of State, Foreign Department. 

Secretary of State, Colonial Department.. . 

8,298 

Secretary of State, for War_*. 

Commander in chief’s office. 

1,946 

2,925 

3,913 

5,708 

5,859 

8,633 

Adjutant-general’s office. 

Quartermaster-general’s office. 

18,356 

187,871 

8,735 

14,570 

28,878 

9,339 

11,534 

War office. 

60,627 

78 

14,950 

4,764 

808 

3,528 

45,809 

29,773 

1,294 

4,638 

5,149 

978 

1,752 

188,713 

33,048 

17,374 

267,964 

312,157 

AA OQ1 

on Ann 

J udge-ad vocate-general’s office. 

ifU , WU 

1,372 
IQ 588 

Chelsea hospital. 

Royal military college. 

A %7 , WOO 

Q Q12 

Royal military asylum. 

V , V A O 

1 78 A 

Army medical department. 

5 280 

Ordnance offices. 

1,044,541 

763,165 

23,354 

1,222,728 

3,618,515 

210,763 

53,098 

103,588 

35,998 

5,155,239 

3,798,157 

3 910 739 

92A *99 

Artificers’ wages for 1853-54. 

33,048 

28 9Q7 

Commissariat office. 

15,923 

105,949 

Admiralty offices. 

272 Q12 

Artificers’ wages for 1853-54. 

Oio,y to 

312,157 

A9 0£Q 

Audit office. 

18 862 

Royal mint. 

28 328 

H , U JI 

in 7no 

OA,yoo 

QO OQQ 

Paymaster-general's office. 

80,915 

4,833 

3,893 

890,701 

79C 

oy,Uoo 
ft* 7AQ 

Exchequer office. 

ou,130 

3,893 
i iAn ft*n 

Customs officers and coast guard. 

270,149 
213 688 

Inland revenue. 

1,1UU,OuU 
1 A7A A Ofi 

Post-office. 

1ft QA* 

i ao qoa 

J-, U f U, 4^0 

159,251 

4,725 

438 

3,494 

Stationery office. 

48,568 

7,275 

36,601 

J. (J , 

13U , OUO 

4,725 

438 

2,959 

State paper office. 


Record office. 

535 


. wjvx/* uuu 

a The percentage here given is according to the original report. According to the 
figures shown in preceding table it should apparently be 31 per cent. 






















































































CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


43 


OTHER CIVIL ESTABLISHMENTS—Continued. 


Names of offices. 


Registrar-general’s office. 

Lunacy commission. 

Metropolitan police offices. 

Queen’s prison. 

National debt office. 

Public works loan commission 

Office of woods, etc. 

Office of works. 

Colonial land emigration. 

Consuls restricted from trade.. 

India board. 

Queen’s remembrancer. 


SCOTLAND. 


Board of fisheries. 

General register office. 

Queen’s and lord treasurer’s remembrancer 

IRELAND. 


Chief secretary’s office. 

Board of works. 

Paymaster of civil services. 

General register office. 

Kilmainham hospital, etc. 

Hibernian military school. 

Dublin metropolitan police offices 

Total. 


Salaries. 

Compensation and 
nuation. 

superan- 

Compen¬ 

sation. 

Superan¬ 

nuation. 

Total. 

$02,588 


$253 

$253 

47,692 

166,936 





16,059 

16,059 

14,726 


5,475 

5,475 

62,204 

$1,202 

10,502 

11,704 

11,990 


3,650 

3,650 

69,236 

1,626 

5,129 

6,755 

81,246 

701 

701 

35,637 


68 

68 

223,372 

46,412 

45,842 

92,254 

77,231 

22,274 

22,274 

27,238 


827 

827 

24,060 


10,473 

10,473 

4,818 

12,779 



2,273 

2,273 

63,182 

23,067 

6,054 

29,121 

92,809 

4,789 

6,701 

11,490 

31,944 

5,319 

5,319 

7,932 


253 

253 

11,675 

146 

837 

983 

12,517 

331 

628 

959 

46,470 


8,161 

8,161 

23,489,939 

1,001,195 

3,292,455 

4,293,650 


Note.— The proportion which the total amount of the] 
compensation allowances of this class bears to the total[L-23£d part, or4J percent. 

amount of salaries is about.J 

Note.— The proportion which the total amount of the] 
compensation allowances of this class bears to the superan- > 1—7th part, or 14 per cent. 

nuation allowances is about. J 

Note.— The proportion which the total amount of the] 
compensation allowances of this class bears to the compen- Vl-5^th part, or 18 per cent, 
sation and superannuation allowances is about.] 

Sir Charles Trevelyan considered the principle of abatements thor¬ 
oughly objectionable, but he took the stand that if it were to be con¬ 
tinued it should be extended to all alike, both to the high political 
officers of the State and to the judges, and from the judges down to 
the lowest paid messenger. He defended his position with great 
ability, showing how the pensions enjoyed by the diplomatic and 
political servants were not only paid for by the State, but that the 
rates of pension were much higher in proportion than those of ordi¬ 
nary civil employees, that they were granted after a much shorter 
period of service, and were altogether more easily and frequently 
obtained. As his opinion seems to have reflected to a great degree 
the sentiment of the civil service itself, some of his remarks should 
be quoted. He said: 

Equality belongs to the very essence of justice, but there are some 
independent, powerful classes, especially the large class of diploma¬ 
tists and lawyers, not merely the judges, but the much larger class of 

























































44 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


administrative officers of the courts in England, Ireland and Scotland, 
and the county court judges, and treasurers and clerks, and the as¬ 
sistant barristers in Ireland, and the sheriffs depute in Scotland, all 
together forming a very large class indeed, who are almost entirely 
exempted from the deductions. The Treasury, in its various dealings 
with the subject of superannuation, has from time to time endeavored 
to bring the several sections of this great class under contribution, but 
we have almost always been foiled; and even when we have succeeded 
in some degree, they have always prescribed conditions to us much 
more favorable to themselves than those to which the clerks are sub¬ 
jected; then, as the powerful few, so are the powerful many. There 
are 24,000 dockyard men, workmen employed in the arsenals, and 
post-office sorters and letter carriers and so forth, all of whom have 
at this moment a contingent right to a pension, without paying any 
deduction whatever; and the inequality there is more remarkable, 
because the exemption from deduction is extended to £200 [$973.30] 
in the dockyards. I presume it was not considered advisable to touch 
any of the large class of workmen, so that although the clerks and 
messengers pay on whatever salaries they may receive, however small 
they may be, a large class of persons in the dockyards are exempted 
up to £200 [$973.30]. ( a ) 

Although questioned very closely by members of the Select Com¬ 
mittee, Sir Charles Trevelyan would not admit that difference in the 
terms of service of different classes of public officers, permanence in 
office, or payment by fees, gave just ground for any difference of 
treatment with regard to deductions. He said: 

My argument is, that all should be dealt with alike. If it is proper 
that one class of public servants should contribute to their own pen¬ 
sions, it is proper that all should contribute toward their pensions. 
If it is proper that large sections of the civil service should be ex¬ 
empted from deductions, and should have their pensions provided for 
them by the State, it is equally proper that all other sections should 
be so exempted. * * * I would have either a system of universal 

superannuation fund, or a system of universal free pension, granted 
by the State; and of the two I very much prefer the latter .( b ) 

(6) PENSIONS PAID EMPLOYEES WHOSE APPOINTMENTS ANTEDATED 
1829 COMPARED WITH THOSE PAID OTHER CIVIL EMPLOYEES. 

If the opposition of the members of the civil service forced to make 
contributions from their salaries to a hypothetical fund on which 
the chances were seven to one they would never draw was stimulated 
by the exemption of the great officers of State and the lowest work¬ 
man of the Government from such requirement, it was fanned to a 
flame by the exemption of certain fellow-officers thus favored simply 
because their appointments antedated August 4, 1829. The civil 
servants appointed subsequently to 1829 saw that they suffered in 
comparison a double disadvantage; they had a lower scale of pen- 

a Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 23. 

& Idem, p. 29. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 45 

sions, and their salaries were subject to considerable deduction. The 
law was very liberally interpreted for the benefit of the early comer. 
Even if he had held a very inferior situation previous to 1829, if he 
had been an extra clerk, for instance, or had held only a temporary 
situation, he was considered to have entered the service previous to 
1829, and was therefore exempted from deductions. However small 
his salary before 1829 and however large his salary in 1856, at the 
time of the investigation, he was exempted from deductions upon the 
whole of his salary. About one-third of the service was at that 
time exempt from paying deductions. As the other two-thirds were 
working in the same offices, at the same tasks, often more efficiently, 
it can easily be understood that there seemed to be some ground for 
complaint. 

(2) Dislike of pension scale and forfeiture provisions. 

In the second place, the civil servants were discontented with the 
provisions of the law. Not only did they think the scale of pensions 
too low (apart from the matter of deductions), but they felt it unjust 
that they should be required to pay a tax during the whole of their 
official lives and receive nothing in return except in case of retire¬ 
ment under the rigid rules of the service. The complete forfeiture 
of their contributions in case of voluntary withdrawal from the serv¬ 
ice before reaching a condition of superannuation or infirmity, in 
case of dismissal from office, or in case of death while in office, was 
resented as a confiscation of property. This lack of provision for 
refund of contributions, and not so much the fact that deductions 
were made from salaries, was the deep-seated reason for the antago¬ 
nism of the civil servants to the system of abatements. There was a 
general feeling that the Government should pension outright the 
whole body of permanent employees, as was not unnatural in 
a country where political pensions were awarded frequently and on 
a most liberal scale, but it is equally apparent that had the law of 
1834 established a contributory plan which was equitable as between 
different classes of employees and which made provision for refund 
of contributions in each and every case the chief complaints to which 
the Select Committee of 1856 listened would never have been made. 

The opinion of a distinguished civil employee, Sir John Herschel, 
no longer in the public service, in regard to the injustice of con¬ 
fiscating contributions, was quoted by Mr. Bromley: 

Whatever is paid to any person employed in remuneration of service 
should be absolutely his property, at least so far as not to be revocable 
at the pleasure of the employer, or defeatable by the accident of death. 

The payment, no doubt, may be made partly in money, and partly 
in the form of a right; but the right should be a vested one, and not 
liable to annulment. The only mode consistent with justice of 
dealing with such portion of a man’s salary as may be withheld from 


46 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


him is to regard it as held in trust and managed for his absolute 
benefit, to be either handed over to him, with accumulations, at the 
termination of his service, or paid over to his executors, etc., in case 
of death, or invested for him (if possible on more advantageous 
terms than he could individually obtain) in such way as he shall 
himself approve, to meet his case as a bachelor, husband, or father. 
Whatever is kept back as constituting a lien upon him for the con¬ 
tinuance of his services, or as affording a hold upon him for good 
conduct, ought rather to be called caution money than salary. So 
far as its accumulation is an advantage, it is yet one contingent con¬ 
ditional and liable to forfeiture. It is not his, and may never become 
his. If he die in the service, it is lost; he has been mulcted of it 
without fault on his part; and if it be forfeited by misconduct he has 
in effect been fined by anticipation. 

To men from whose motives fortune and fame are excluded; who 
labor in obscurity, and see their equals passing them in the career 
of life; the sole redeeming feature of whose position is its certainty, 
it does seem most incongruous to introduce an element of this nature. 

An objector to the present system might say, “If you assert that a 
man has a salary of £100 [$486.65] per annum, you are bound to give 
it him in some form or other of hard cash, and not of expectations, 
which may be disappointed. If with his consent, by means of a 
forced bargain, or in his ignorance of its nature at the moment of his 
engagement, you keep back a part of it, you are bound to pay it, not 
to some other party in whom he has no interest, but to himself or his 
nominees, and that whether his conduct has been good or bad (pun¬ 
ishing bad conduct by dismissal, and criminal by the penal law). 
You incur this obligation, not with him, but with mankind, that 
words should correspond to things and mean realities. You assume pro 
tanto the position of a savings bank, and are bound to account to the 
uttermost farthing, not to the mass of your contributors, but to each 
individual. An act of Parliament may legalize, but can not justify, 
a contrary view of the matter. (°) 

It will be remembered that in the petition to the committee 
signed by 9,791 members of the civil service, out of an aggregate 
number of about 16,000 persons, the following statement was made: 

Although all your petitioners during their entire official career are 
thus taxed for superannuation, yet, as it is estimated, according to 
the average duration of life, that not more than one in ten can be 
superannuated, it follows that the contributions of the remaining 
nine-tenths are absolutely lost to them and their families. ( b ) 

(a) FORFEITURE PROVISION OBJECTIONABLE AS A FORM OF TONTINE. 

The calculation of Dr. William Farr, head of the Statistical Office 
of the Department of the Registrar-General, was that about one in 
eight of the whole number of persons in the civil service whose 
salaries are liable to deductions became superannuated, while Felix 
John Hamel, esq., solicitor to the Board of Customs, told the Select 

° Report on Civil Service Superannuation. 1856. Appendix No. 9, p. 416. 

&Idem, Appendix No. 16, p. 462. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 47 

Committee that, according to his calculations, not more than one in 
seven of the contributors in the Customs reached the age of super¬ 
annuation. The others died or left the service before reaching the age 
at which they could claim a superannuation allowance, so that the 
statement of the civil servants in their petition that “according to 
the average duration of life” not more than one in ten can be super¬ 
annuated was apparently an exaggeration of the fact, being based on 
incomplete reasoning, since the average rate of resignations and 
dismissals is a factor in such calculations as much as “the average 
duration of life.” The truth, however, was bad enough and showed 
that the civil employees were justified in their lack of enthusiasm 
for a system which compelled them to contribute to an object by 
which not more than one-seventh or one-eighth of their number 
could possibly profit. Mr. Hamel’s calculation showed the volun¬ 
tary resignations before the age of 61 at 14 per cent of the whole 
number of clerks, the dismissals at 20 per cent, and the deaths at 50 
per cent, making a total of 84 per cent of the civil servants who 
never reached superannuation. 

“Under this arrangement for granting allowances out of deduc¬ 
tions,” declared Doctor Farr to the Select Committee, “you necessarily 
have to take the deductions from men who never derive any benefit 
whatever from the fund. This is, I conceive, an insuperable objection 
to the system. The families of the men who die are harshly dealt 
with; you take from the widow and fatherless children the deductions 
of the men who die, to enable you to pension those who live. Now, 
it is impossible to convince the widows or the orphan children of 
the officers who die in the service that it is just to deprive them of 
the advantage derived from the contribution of the parent, to enable 
you to pay the superannuation allowances of those officers who are 
so fortunate as to live.”( a ) And a week later he told the Select 
Committee the same thing with a different choice of words: “Sup¬ 
posing that 1,000 men commence paying those deductions, and you 
receive those deductions, and invest them at interest, and let them 
go on accumulating for forty years, at the end of that time you will 
have to divide the money among the survivors, only of the 1,000. 
This system of the Government is a tontine, and the objections 
against tontines hold against this scheme of deferred annuities.” ( 6 ) 

Doctor Farr was one of the most eminent actuaries of his day and 
his testimony to the committee in the course of this investigation 
was particularly helpful in making clear the unsoundness of the 
superannuation scheme established under the Act of 1834. The 
civil employees did not need to be actuaries, however, to perceive 
the nature of the system of which they were victims. 


“Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 176. 
&Idem, p. 243. 




48 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

Asked what was the objection of the civil service to the system of 
abatements, Mr. Bromley, chairman of the committee of civil serv¬ 
ants, said: 

The main objection which we entertain is this: that the scale of 
public salaries is fixed as a just payment for the work to be done, 
and that the abatement made from those salaries to secure a deferred 
annuity is an object for which we consider the State itself ought to 
provide; that is the broad issue. We consider that the State itself 
ought to provide for its worn-out servants. The present law of 1834 
directs that the servants shall provide for themselves; but the abate¬ 
ment is not now levied upon a mutual principle; it is upon the 
principle of a lottery, or rather upon the principle of a tontine, that 
a great many gentlemen shall put in a certain sum, and the longest 
liver shall derive the benefit. Upon these grounds we object to the 
abatements. ( a ) 

(b) FORFEITURE PROVISION ESPECIALLY UNJUST IN CASES OF CLERKS 
DYING IN HARNESS. 

The hearings abound in citations of cases of civil servants who 
contributed for years to the supposed “Superannuation Fund” and 
dying left their families in destitute circumstances. Letters from 
individual clerks bring out this grievance strongly. 

The widow of John Rendall, who held the position of consul in the 
Cape de Verde Islands from 1839 to 1854, begged the committee to 
grant her indemnification for the pecuniary loss she had sustained by 
the death of her husband, on the ground that during the sixteen years 
of his service he had contributed to the “Superannuation Fund” with 
the impression that he was at the same time securing to his wife and 
family benefits to be derived in the future, and that the deduction 
from his salary precluded him devoting any other proportion of his 
income to the insurance of his life. 

D. H. Harris, a landing waiter in the Customs service, wrote, on 
March 24, 1856, to F. J. Hamel, solicitor to the Board of Customs, a 
letter setting forth the woes of his class: 

My nominal salary is £200 [$973.30] per annum; I only receive 
£167 6s ($814.16). The remainder is swallowed up in income tax, 
superannuation tax, and premium for insurance of £300 in the customs 
benevolent fund. These deductions amount to about 17 per cent, 
or one-sixth of my actual receipts. 

As the relative condition of the officers in the civil service has 
formed part of the inquiry before the committee of the House of 
Commons, permit me to draw your attention to the fact that, with 
this same salary of £200 [$973.30] per annum, either in the service 
of the Bank of England, the East India Company, or the London 
Dock Company, I should be at least 12 per cent better off than as a 


Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 80. 





CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


49 


civil servant of the Crown, because the former pay the salaries of 
their servants in full, and give retiring allowances without deductions; 
the latter deduct not only income tax, but abatements for superan¬ 
nuation also. The hours of work and attendance are similar. I 
find that, as a body, the condition of the officers of the Customs is a 
depressed ono; they are for the most part ill paid, and, in the event 
of early or sudden death, their famdies aro often left in a most 
wretched state of destitution. * * * 

After enumerating a number of cases that had come under his 
observation, ho continued: 

Under the superannuation law a man may pay twenty, thirty, or 
forty years, and never receive a shilling. The longer he serves the 
less chance lie has of receiving any benefit, because the older ho gets the 
less the probability of his surviving to receive it; and if he dies with 
part of his salary due, his widow is actually mulcted five per cent of 
the balance due, though it is then utterly impossible that any benefit 
can accrue from it. Another feature presents itself: when the 
poor day-pay officer is sick his day pay is stopped; but from his 
smalf salary, when the quarter comes round, is deducted the super¬ 
annuation tax of 2 \ per cent upon the sums which ho did not receive. 
If he should die, his widow would be forced to contribute to tho super¬ 
annuation tax upon the unreceived half-crowns, the lack of which, 
perhaps, induced exhaustion to her husband, and want of bread to 
her children. When the officer entering tho service first hears of 
this deduction, he consoles himself with the idea that it is for some 
certain though perhaps far-ofT benefit which will accrue to him; he 
next finds that it is a tax to reduce the charge upon the country for his 
probable superannuation; next, that it is not only more than enough 
to reduce that charge, but sufficient to confer a large benefit on 
noncontributors, and that he who must pay may possibly never get 
a shilling. ( a ) 

W. B. Hambly, a clerk in the Royal Engineer Department, wrote 
the committee on the civil service superannuation bill partly as 
follows: 

Whilst this momentous question is under consideration by your 
honorable committee, and before its fate is sealed by act of Parlia¬ 
ment, something is due to the widow and orphan of the civil servant; 
for it seems hard indeed that his last dying thoughts were to be em¬ 
bittered by the terrible idea that his wife and children, whom, whilst 
the Almighty had been pleased to grant him life and health, he had 
toiled to provide for, cherish and comfort, should at his death be 
thrown penniless on the world, and the fund to which he had all his 
life subscribed be shut against them. It seems but just, that whatever 
allowance this fund entitled him to, should, at his death, be handed 
down as a support (if bona fide required) to his wife and children; 
for I may here remark, that it is not in the power of any Government 


Report on Civil Service Superannuation. 1856. Appendix No. 15, p. 453. 
35885—S. Doc. 290, 61-2-4* 



50 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


clerk (except those in the high offices) to provide out of their pay 
anything for the future support of either wife or children. The pay 
is altogether too inadequate for such a purpose, and the Government 
deductions are so heavy, that it is with difficulty they can live on the 
pay received. Therefore, out of the civil servants’ superannuation 
fund, it is the more incumbent on Government to provide for their 
wives and children; and that in the event of the husband dying in 
office, that they should receive the full allowance the length of service 
would have entitled the deceased to; or when death occurred, after 
being superannuated, that the same allowance should be continued 
to the wife as the husband had been enjoying, and, as he had paid 
for it, his family might fairly be entitled to it. ( a ) 

The fact that the committee of eivil servants was seeking chiefly 
not an abolition of the compulsory deductions but a limitation of the 
deductions to 2 \ per cent for the creation of an insurance fund is 
sufficient proof that among a large number of the civil employees 
there was no serious objection to the deductions, as such, provided 
they were used for the benefit of the families of those whose salaries 
were thus taxed. This point is brought out even more clearly by 
William Willis, esq., the secretary of the committee of civil servants 
Asked by the chairman of the parliamentary committee to state the 
objections entertained by the members of the association which he 
represented to the present system of superannuation, he said: 

The objections are numerous. The first is, that the abatements 
operate with very great severity upon a class whose incomes are 
small; coupled with the income tax, they amount to a deduction of 
11 per cent. The origin of the movement arose in our finding such 
great digress to exist amongst the families of the clerks. I was my¬ 
self aware of it to some extent, and have had applications before me 
of a most painful nature from the widows of officers petitioning for 
the collection of even a few shillings; in one case the body of an 
officer could not be buried for want of means, nor until subscriptions 
had been collected in the office to which he had belonged. Finding 
that this distress was very general, and as our inquiries also led us 
to believe that insurance was effected in but a very small minority of 
cases amongst the civil servants, we were induced to inquire whether 
means could not be adopted of providing some insurance fund. 

“If I understand your statement correctly, the first object that 
your society had in view was the establishment of an insurance fund 
for the widows and children of deceased public servants?” asked the 
chairman. “It was.” 

“How did you propose to accomplish that object? 

“We proposed to establish an insurance fund by means of con¬ 
tributions from the service; but we found that that was wholly out 
of the question, because these abatements precluded the civil serv¬ 
ants from subscribing to any such association. It was these abate¬ 
ments which debarred them from the power of making insurances.” ( * 6 ) 


a Report on Civil Service Superannuation. 1856. Appendix No. 15, p.455, 

6 Idem. Minutes of evidence, pp. 144, 145, 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 51 

On this point Doctor Farr was also equally clear. “One objection 
to the deduction in its present form,” he told the Select Committee, “is 
that it prevents so large a number of the public servants from insuring 
their lives; but if you remit the deduction for the purpose of super¬ 
annuation they would be enabled to appropriate at least a part of 
their salaries for the insurance of their lives.” (°) 

(c) FORFEITABLE DEDUCTIONS WITH INADEQUATE SALARIES A BAR TO 
LIFE INSURANCE. 

Doctor Farr had been consulted a number of years before this by 
the committee of civil servants formed for investigating the subject of 
superannuations. They had claimed that cases of distress occurred 
very frequently in the service in consequence of the fact that many of 
the civil employees were unable to insure their lives, owing to the insuf¬ 
ficiency of their salaries and the deductions made from those sala¬ 
ries. Doctor Farr had requested them to procure information from 
the public departments. They did so, and he embodied the infor¬ 
mation in a paper read before the Statistical Society of London on 
December 18, 1848. This showed that 16,353 officers, either paying 
contributions or in offices liable to pay contributions to the superan¬ 
nuation fund, had, on an average, salaries of £141 ($686.18) a year; 
that is the nominal salary, which would be further reduced by the 
deduction to £135 ($656.98) a year. Two-thirds of those salaries did 
not exceed £100 ($486.65) a year; they were on an average £86 
($418.52) a year. Information of another kind showed that of the 
16,353 officers, about 11,023 had wives living, as well as 21,952 
children under 15 years of age, making in the aggregate 49,328 per¬ 
sons more or less dependent on the salaries. Each married civil 
employee in the station of life in which he is would keep one or more 
servants; that would imply that there was about £34 ($165.46) a 
head on the total number of persons dependent on the civil servants 
contributing to the fund. Doctor Farr stated to the Select Com¬ 
mittee that that appeared to him to substantiate the statement 
of the civil servants that their salaries scarcely permitted them to 
insure their lives.( 6 ) 

In connection with the oft-repeated statement that the salary of 
the average civil service clerk was not sufficient to bear deductions 
the statement of the annual expenditure of a married clerk, compiled 
by J. T. Ilammack, of the Statistical Department of the Registrar- 
General’s Office, “from information that can be relied upon,” is inter- 


a Report on Civil Service Superannuation, 1856. Minutes of evidence, p. 188. 
5 Idem, pp. 159,160. 



52 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


esting. This statement showed “the annual expense, regulated with 
the strictest regard to economy, of a family consisting of five persons, 
viz, a civil service clerk, his wife, two children, and a servant.” The 
total annual expenditure was shown to be £183 7s. 5d. ($892.37). 
The salary of a civil service clerk appointed after August, 1829, 
amounting to £200 ($973.30), was subject to a superannuation abate¬ 
ment of 1 shilling in the pound (5 per cent) or £10 ($48.67), and to an 
income tax of Is. 4d. in the pound (6§ per cent) or £12 13s. 4d. 
($61.64) (°), or a total deduction of £22 13s. 4d. ($110.31). This left 
him a net amount of salary of £177 6s. 8d. ($862.99), so that a nominal 
salary of £200 ($973.30) per annum, unsupported by private resources, 
would be insufficient to enable the clerk to meet the above expendi¬ 
ture to the extent of £6 9d. ($29.38). This estimate omitted all 
allowance for the education of children, sittings in a place of worship, 
life assurance, excursions into the country during vacation, and 
indeed all other recreation attended with expense, made no provision 
for lengthened illness or death in the family of the clerk; and in the 
event of the death of the clerk himself there was no provision what¬ 
ever for his wife and children or other dependent relatives. It was 
argued that the sum deducted for superannuation, £10 ($48.67) 
would, if remitted, enable the clerk to effect a small insurance upon 
his life. Fuller details of the statement of expenses are as follows: ( 6 ) 

ANNUAL EXPENDITURE OF A MARRIED CLERK. 

[Statement showing the annual expense, regulated with the strictest regard to economy, of a family con¬ 
sisting of five persons, viz, a civil-service clerk, his wife, two children, and a servant.] 


ITEMS OF EXPENDITURE. 

House rent and taxes: 

Rent of a six-roomed house (in the suburbs of London). $ 121 . 66 

House tax (9d. in the pound (3f per cent) on the rent paid)_ 4 . 56 

Poor rate (say, 3s. in the pound (15 per cent) on a rating of £22 

($107.06). 16.06 

Lighting, paving, and highway rates (say). 6 . 09 

Water rate.. 5 . n 


_ . . - $153.48 

Provisions and other household necessaries (per week, for five per¬ 


sons) : 

Bread, 32 lbs., at 2£d. (4.6 cents) per lb., 6 s. ($1.46); flour, 1 

quartern, lOd. (20 cents). 1. 66 

Meat, 14 lbs., at 8 d. (16 cents) per lb. 2 . 27 

Tea, \ lb., 2s. (49 cents); coffee, f lb., Is. (24 cents). . 73 

Sugar, 3 lbs., at 5d. (10 cents). .30 

Butter, 2 lbs., 2 s. 4d. (57 cents); eggs, bacon, cheese, Is. 4 d. 

(32 cents). 89 


«The amount here given is according to the original report. Calculated on the 
basis shown it should apparently be £13 6s. 8d. ($64.89). 
b Report on Civil Service Superannuation. 1856. Appendix No. 14, p. 451. 















CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


53 


Provisions and other household necessaries (per week, for five per¬ 


sons)—Continued. 

Vegetables and fruit, 3d. (6 cents) per day. $ 0 . 43 

Beer, 3 pints per day, 21 per week, at 2d. (4 cents).85 

Milk, 1 pint per day, at 2d. (4 cents). .29 

Candles. 37 

Firewood, and materials for cleaning house. .24 

Soap, mustard, vinegar, pepper, rice, &c . .16 

Washing (done at home), 6 d. (12 cents) per head. .61 


Per week. 8 . 80 


Per annum. 457 . 61 

Coals (in the year), 5 tons, at 25s. ($6.08). 30. 42 

- $488. 03 

Servant’s wages. 38. 93 

Clothing: 

The clerk. 73 . 00 

His wife. 43 . 80 

His children. 38. 93 

- 155.73 

Medical attendance on family (average). 14. 60 

Renewal and repair of furniture, house linen, &c. 19. 46 

Fire insurance on furniture £200 ($973.30), premium 5s. ($1.22), duty 6s. 

(H.46).... 2.68 

Pocket money for omnibuses, and other incidental personal expenses. 19. 46 

Education of children. 

Sittings in place of worship. 

Excursion into country during vacation. 

Wine and spirits. 


Insurance on life, to make some small provision for his family in the event 
of his decease. 


Total annual expenditure. 892. 37 

The salary of a civil-service clerk appointed since August, 1829, amounting 
to £200 ($973.30) is subject to the following deductions: 

Superannuation abatement, Is. in the pound (5 per cent) £10. $48. 67 
Income tax, Is. 4d. in the pound (6f per cent) £12 13s. 4d.. a 61. 64 

- $110. 31 


Leaving the net amount to be received by him. 862. 99 

So that a nominal salary of £200 ($973.30) per annum, unsupported 
by private resources, would be insufficient to enable the clerk to 

meet the above expenditure to the extent of. 29. 38 

• - 892.37 


The combined effect of superannuation abatements and income 
tax on the salary of the civil servant was shown by the following 
statement: ( b ) 

a The amount here given is according to the original report. Calculated on the 
basis shown, it should apparently be £13 6s. 8d. ($64.89). 

& Report on Civil Service Superannuation, 1856. Appendix No. 14, p. 452. 






































54 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

COMBINED EFFECT OF SUPERANNUATION ABATEMENTS AND INCOME TAX. 

[Statement showing the difference between the nominal salary of a civil servant appointed since August, 
1829 and the net amount payable to him after deducting the superannuation abatement and income tax, 
on salaries from £80 ($389) to £500 ($2,433).] 


Nominal yearly 
salary. 

Deductions for— 

Super¬ 

annua¬ 

tion. 

Income 

tax. 

Total. 

$389.32 

$9.73 


$9.73 

437.99 

10.95 


10.95 

486.65 

12.17 


12.17 

510.98 

25.55 


25.55 

a535.32 

26.77 

$24.35 

51.12 

583.98 

29.20 

26.58 

55.78 

632.65 

31.63 

28.77 

60. 40 

681.31 

34.07 

31.00 

65.07 

729.98 

36. 50 

33.21 

69.71 

778.64 

38.93 

49.31 

88.24 

827.31 

41.37 

52.40 

93.77 

875.97 

43.80 

55.48 

99.28 

924.64 

46.23 

58.56 

104.79 

973.30 

48.67 

61.64 

110.31 

1,216.63 

60.83 

77.05 

137.88 

1,459.95 

73.00 

92.46 

165. 46 

1,703.28 

85.16 

107.87 

193. 03 

1,946.60 

97.33 

123.28 

220.61 

2,189.93 

109. 50 

138. 70 

248.20 

2,433.25 

121.66 

154.11 

275.77 

6 2,433.25 

(*) 

162.22 

162.22 


Remarks. 


Superannuation, fid. ($0.12) per pound ($4.87). 
Superannuation, Is. ($0.24) per pound ($4.87). 

Superannuation, Is. ($0.24) per pound ($4.87). 
'Income tax, ll§d. ($0.23) per pound ($4.87). 


Superannuation, Is. ($0.24) per pound ($4.87). 
'Income tax, Is. 4d. ($0.32) per pound ($4.87). 


Net 

amount. 


$379.59 
427.04 
474.48 
485. 43 
a 484. 20 
528. 20 
572.25 
616.24 
660.27 
690. 40 
733.54 
776.69 
819.85 
862.99 
1,078.75 
1,294.49 
1,510.25 
1,725. 99 
1,941.73 
2,157.48 
62,271.03 


a It will be observed that upon the promotion of a clerk from £105 ($510.98) to £110 ($535.32) he is a posi¬ 
tive loser by the step. 

6 Salary of an officer appointed prior to August, 1829, and therefore exempt from superannuation tax. 

(< d ) FREE PENSIONS DESIRED WITH COMPULSORY DEDUCTIONS FOR 
PURPOSE OF LIFE INSURANCE. 


Taking all these facts into consideration, and realizing besides the 
actuarial unsoundness of certain features of the existing superannua¬ 
tion scheme, as will be explained later on, Doctor Farr threw the weight 
of his influence with the arguments of those civil servants who asked 
that pensions be granted free by the State and that a compulsory 
insurance fund be formed out of 2J per cent deductions from all sal¬ 
aries above £100 ($486.65) a year. This would have been a decided 
improvement over the existing scheme, as it meant practically an 
increase of 2 \ per cent in salary, an insurance benefit in case of death, 
and a pension in case of superannuation. The advisability of so 
arranging matters as to make it possible to compel the civil employee 
to insure his life was thus set forth by Doctor Farr: 

The utility of life insurance is universally admitted. Insurance 
could be effected on very advantageous terms by the servants them¬ 
selves: it would save many hundreds of families from deep distress; 
and it would raise the character of the service. Upon this subject 
there are now differences of opinion, but those who differ from the 
committee are equally animated by a desire to leave a provision for 
their wives and their children: they think that it should be done 
entirely on the voluntary principle; I, on the contrary, think that it 
should be to a certain extent on a settled principle, for reasons which 
I will very briefly state to the committee. Children, women and 


















CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 55 

men advanced in years can rarely earn enough to supply themselves 
with subsistence.. Men who enter a profession have therefore, during 
their years of active life, not only to supply the current wants of their 
families, but to make a provision for the infirmities of sickness or age, 
and, in consequence of the mortality of their nature, for their widows 
and children. In Great Britain, to every 100 wives, there were at the 
census 2d widows living: there are now living about 2,300 widows of 
deceased civil servants, and an unknown number of fatherless chil¬ 
dren, which the returns leave undetermined. The children of pos¬ 
sessors of property are naturally provided for under our laws, and the 
children of the man whose income is derived from his industry gener¬ 
ally enjoys the same privilege; but the source of income depending 
on his life, they are liable at any time to be thrown on the community 
for support, which is, in a high degree, precarious. In the middle and 
in the higher classes they are practically thrown upon the hands of 
their relatives, of the charitable, and, in some rare instances, of the 
parish. Life insurance meets the risk of mortality; but it unfortu¬ 
nately happens in all professions, and in the civil service among others, 
that life insurance to an adequate extent is not effected by the great 
majority of husbands, and more particularly by those whose lives are 
most liable to be cut short, and whose large families are likely to prove 
the severest pressure of want—the heaviest burden on the commu¬ 
nity. Society has therefore a right, and, whenever an opportunity 
offers, perhaps a duty, to see that such a deduction is made from the 
adequate income in active life as will lighten the sufferings of the 
fatherless children and widows of its members. If the Government 
set the example in the public service, it may be copied by other 
classes, and would ultimately prove a great boon and an economy to 
the nation. ( a ) 

The amendment to the superannuation bill relating to insurance 
proposed by Mr. Bromley and his adherents and indorsed by Doctor 
Farr was as follows: 

And whereas great distress from time to time occurs amongst the 
families of deceased civil servants, and various efforts have been made 
to establish departmental benevolent funds for their relief, but all 
such funds have failed without contributions being made in aid thereof 
by the State, or indirect assistance afforded in the collection of the 
same; it is expedient that such-contributions or assistance, if given at 
all, should be for the general benefit of the whole service, and not for 
particular departments; it is therefore directed that from and after the 
first day of April one thousand eight hundred and fifty-six, when the 
abatements made under the twenty-seventh section of the aforesaid 
act shall cease, there shall be an abatement made in quarterly or 
monthly proportions, by the proper officer in each department, from 
the annual salaries of the several officers and persons employed in the 
civil offices and departments to which this act applies, who have since 
the fourth day of August one thousand eight hundred and twenty- 
nine entered or shall hereafter enter the public service, the amount of 
which abatement shall be at the annual rate of two pounds and ten 
shillings per centum [2J per cent]. The amount so abated and 
brought to account in the books of each respective department shall 


Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 184. 




56 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


be paid over quarterly to the National Debt Commissioners, for the 
purpose of forming a * 1 Civil Service Insurance Fund, in which name 
an account shall be opened in the books of the Bank of England, and 
such fund shall be directed and controlled for the benefit of each 
individual contributor, upon the common principles of life assurance, 
by such persons and in such manner as the lords commissioners of Her 
Majesty’s Treasury may from time to time direct; and in making such 
settlement full credit shall be given to each individual who may have 
already contributed in aid of the aforesaid sum of eight hundred 
thousand pounds [$3,893,200], in fixing the amount of insurance to 
which his contributions may entitle him; all which proceedings and 
regulations shall from time to time be laid before Parliament, and the 
accounts of the said fund shall be submitted periodically to the com¬ 
missioners for auditing the public accounts, and after each annual 
audit by them, a copy of the said account, with the report of the 
auditors thereon, shall be by them laid before Parliament. ( a ) 

Mr. Bromley’s reasons for advocating this measure, as explained to 
the committee, make an interesting contribution to a discussion 
which has continued down to the present year. Said he: 

The very great distress in the lower ranks of the service induced me 
to take up this question, and I was at the time encouraged to do so by 
the debate in Parliament in March 1844, relative to the distressed 
state of the family of Doctor Morrison, who died in China, after he had 
rendered valuable public service. 

All attempts to form voluntary funds for the purpose had failed; an 
order in council was obtained in 1819 to establish a fund in the Admi¬ 
ralty, but it did not succeed. Indeed, the distress in the revenue de¬ 
partments was admitted by the Government to be so general, that in 
the Customs a benevolent fund was established by act of Parliament 
in 1816; it was however found necessary to require a compulsory con¬ 
tribution for its support, added to which, the profits of the bill of 
entry (somewhat analogous to the profits of the London Gazette) 
were given up by the Government in aid thereof. 

In the Post-Office the Government have allowed the property 
found in dead letters to be applied in aid of a charitable fund. 

In the Inland Revenue, the Government assist the Atlas Assurance 
Office in collecting premiums, &c., from officers who insure in that 
office under certain advantages. 

In the Ordnance Department certain pensions are paid to the 
widows of clerks by the Government. 

If the principle is correct in these cases, it does not appear to be 
just to exclude other civil servants from such advantages; and as 
the compulsory principle has been adopted by Parliament with re¬ 
spect to a large body of its civil servants, although the great majority 
of them derive no benefit therefrom, it does appear to be sound policy 
to extend that system to all, to be coupled, however, with this most 
just provision, that the proposed contributions shall be applied for 
the benefit of each individual, according to the value of his contribu¬ 
tion. 

° Report on Civil Service Superannuation. 1856. Appendix No. 9, p. 417. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


57 


It has been ascertained that 83 per cent of civil servants are un¬ 
insured in the local funds already established, notwithstanding the 
aid afforded them by the Government. 

It is doubtless higher ground to advocate the voluntary rather 
than the compulsory principle of life insurance, and were its truth¬ 
fulness equally enforced by experience, it might require no arguments 
to recommend its adoption; but unfortunately in this, as in most 
other instances, there is a wide discrepancy in human conduct be¬ 
tween what ought to be and that which actually takes place; and it 
is to be feared there is no alternative in this case but to fall back upon 
some inflexible law external to itself; and this I conceive will best 
be met by a compulsory conversion of a moiety of the present super¬ 
annuation assessments into an insurance fund, for the oenefit of rep¬ 
resentatives of deceased civil servants. 

This is no new theory which it is desired to urge upon the State 
or the public; as, in the case of the navy and army services, provi¬ 
sion is made, as a rule, for the wives and families of naval and military 
servants, independently of the additional pension granted for loss 
of life in action, there is likewise a compulsory abatement imposed 
upon the whole medical force of the Navy for the support of their 
widows only; the East India Company likewise enforces a contribu¬ 
tion from its servants for the support of their families; the Emperor 
of the French has also established a compulsory provision for the 
families of the employees of the State. The Bank of England re¬ 
quires its servants to insure their lives, and several private estab¬ 
lishments have adopted a similar course. 

Such a concurrence of testimony, and from such various sources, 
must be considered, upon all fair terms of reasoning, as incontro- 
vertibly establishing the principle under consideration. 

It is, therefore, from the conviction that the position of the civil 
servants will be materially improved by the adoption of the com¬ 
pulsory principle of life insurance, and also from the consideration 
that the State is preeminently interested in relieving its servants as 
much as possible from the cares and desponding influences which 
can not fail to have a most depreciating effect upon their official 
energies, that I am induced to lay such stress upon the formation of 
this fund by an appropriation of one-half of the present superannua¬ 
tion percentage to that purpose, remitting the remaining half to the 
civil servants to meet immediate exigencies. ( a ) 

(3) Distrust of actuarial soundness of plan embodied in Act of 1834. 

In the third place there was distrust of the actuarial soundness of 
the plan. This was not so general, however, as might be supposed. 
The statement is frequently made that the contributory plan failed 
in England because it was found in 1857 that the superannuation 
fund was hopelessly insolvent; that it was therefore turned into the 
general exchequer and pensions were thereafter paid by the Govern¬ 
ment. This is not strictly correct, because, as has been shown in 
the previous pages, no fund was established under the Act of 1834, 

a Report on Civil Service Superannuation. 1856. Appendix No. 9, p. 417. 




58 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


and the contributions had been turned into the general exchequer 
from the very beginning. Furthermore, even if there had been a 
fund and it had been found in a very satisfactory condition, the sec¬ 
tion of the act which provided for contributions from the civil serv¬ 
ants would probably have been repealed in 1857 just as it was, for 
the discontent of the civil servants, which moved Parliament to act, 
rested, as has been shown, on quite different grounds. They brought 
no charge of insolvency against the fund, but rather one against the 
Government of confiscation of property rights and inequitable treat¬ 
ment as between different classes of the service. Instead of believing 
the fund insolvent—supposing their contributions had been funded— 
the civil employees were inclined to believe that their contributions 
had been much more than adequate for the payment of their pen¬ 
sions, as shown, for instance, in the last sentence of Mr. Harris's 
letter quoted above: “It (the deduction) is not only more than 
enough to reduce that charge, but sufficient to confer a large benefit 
on noncontributors." The final action of the Civil Service Super¬ 
annuation Commission which was appointed to succeed the Select 
Committee in 1857 was taken quite without reference to this actuarial 
question of the adequacy of the contributions; in fact, it was not 
known until nearly a year after the abolition of deductions had been 
recommended by the commission that the contributions of the civil 
servants were inadequate for the payment of the pensions provided 
under the Act of 1834. 

Before the Select Committee went out of existence it engaged 
Messrs. Arthur Morgan, F. R. S., actuary to the Equitable Society 
of London, and Charles Ansell, F. R. S., actuary of the Atlas Assur¬ 
ance Office, to prepare answers to certain questions. Messrs. 
Ansell and Morgan furnished the committee with such information 
as was within their power; but with reference to the most important 
question submitted to them, namely, whether the deductions taken 
under the Act of 1834 were more than adequate to meet the charge 
under the act for this class of civil servants, they declared their ina¬ 
bility to give a satisfactory answer “until they should be provided 
with certain voluminous statistical returns with reference to the 
civil servants employed in the different public offices, and until they 
should have had time to complete the laborious calculations which 
would be required for extracting the desired information from these 
returns." The committee was obliged, therefore, to conclude its 
labors without the desired information, and the Superannuation Com¬ 
mission, which succeeded it, was prepared with its report in May, 
1857, long before the actuaries were ready to answer the question 
asked of them. So laborious did they find their task that not until 
March 19, 1858, were the actuaries able to submit their report. In 
the meantime, the commission, not comprehending the technical 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 59 

difficulties of the subject, and therefore not inclining to distrust their 
own conclusions, had made various recommendations, and toward 
the latter end of the session of Parliament, 1857, an act was passed 
for effecting the abolition of abatements from salaries, the most 
important of their suggestions. “Having found,” wrote the com¬ 
missioners, “on a full consideration of the subject referred to us, 
that our recommendations could not be affected by the result of these 
inquiries of the actuaries, we did not consider ourselves justified in 
withholding our report until we were acquainted with the conclu¬ 
sions at which they might arrive.” 

When the report of Messrs. Ansell and Morgan was finally com¬ 
pleted the following year, the commissioners transmitted it to the 
Lords Commissioners of the Treasury with the following comment: 

It will be seen that, with regard to the main subject of their inqui¬ 
ries, Messrs. Ansell and Morgan are decidedly of opinion that the 
deductions made from the salaries of the civil servants, under the 
authority of the Act of 1834, were not adequate to meet the charge 
to which the public was liable under that act. This conclusion may 
be considered a sufficient answer to the claim which was made on 
behalf of the civil servants, on the ground that the deductions were 
more than sufficient to provide the retired allowances, and that the 
public were making a profit of the transaction at the expense of the 
civil servants. But as we expressly repudiated in our report the 
notion of any contract between the public and the body of the civil 
servants, and as we founded our recommendation of the abolition of 
deductions upon totally different grounds, our conclusions cannot 
be affected by any opinion at which the actuaries may have arrived 
on this question. ( a ) 

While it can not be said, therefore, that there was any general 
appreciation of the fact that the superannuation scheme established 
by the Act of 1834 was actuarially unsound, study of the hearings 
shows that most of the witnesses questioned the reasonableness as 
well as the justice of some feature of the plan, and those witnesses 
who had special knowledge of statistical or actuarial problems 
pointed out its inconsistencies or dangers. 

The chief actuarial faults of the plan were two, and these two faults 
were criticised more or less blindly by various witnesses before the 
Select Committee who felt that something was wrong but found dif¬ 
ficulty in defining it. They were (1) the provision for flat-rate assess¬ 
ments, and (2) the lack of provision for taking care of the accrued 
liabilities. 

(a) FLAT-RATE ASSESSMENTS CONSIDERED INEQUITABLE AND POSSIBLY 
• INADEQUATE. 

The law provided for a flat-rate assessment of salaries regardless 
of the age at which contributors entered the service—an arrangement 
which is always unjust to the younger contributors. The rates of 

o Supplemental report on the Operation of the Superannuation Act. 1858. p. 3. 




60 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

contribution of 2^ per cent on all salaries of £100 ($486.65) and under 
and 5 per cent on all salaries above £100 ($486.65) were, of course, 
inadequate to provide retiring allowances ranging from fifteen-six¬ 
tieths of salary after ten years’ service up to forty-sixtieths after 
forty-five years’ service. While this was not the issue before the civil 
service or before Parliament, which had become disgusted with the 
plan on other grounds, it is fortunate for students of the subject that 
actuaries were engaged to inquire into the sufficiency of the deduc¬ 
tions to meet the claims under the law, because the result of their 
valuation shows very clearly the practical difficulty of making any 
plan self-supporting which is based on flat-rate contributions required 
without reference to the age at which the contributors enter the serv¬ 
ice. While theoretically it may be a simple matter to fix a flat rate 
of contribution which will be adequate in a given problem, practi¬ 
cally it never seems to be feasible owing to the difficulty of valuation, 
and the experience of Great Britain is simply corroborative of the 
general rule that a superannuation plan based on flat-rate assess¬ 
ments usually means too low a rate and therefore inadequate con¬ 
tributions, leading ultimately to the insolvency of the superannuation 
fund. Since there really was no fund to be insolvent in this case, and 
since there was nothing in the Treasury minute of 1829 or the Act of 
1834 to indicate that it had been the intention of the Government to 
make the contributions sufficient to meet the charges, the inadequacy 
of the rate of contributions can hardly be justly criticised in this plan. 
The language of the act sanctioning the Treasury minute, “with a view 
to reduce prospectively the charge incurred in providing for super¬ 
annuation allowances,” was not such as to indicate that the Govern¬ 
ment did so with the expectation of making the plan entirely self- 
supporting. The discovery that the contributions were inadequate, 
unexpected as it was, merely showed the British public the undesir¬ 
ability, from a new viewpoint, of the plan which they had already set 
aside for other reasons. 

But the injustice of the flat-rate assessment as between individ¬ 
uals was apparent to many before it was known that the rate was 
inadequate. “It is the grand and fatal objection to the scheme as it 
at present exists,” said Doctor Farr to the committee, “that there is 
no proportion between what is taken and what is given.” And again 
he said, “Under the present arrangement there is no equitable rela¬ 
tion between the premium paid and the benefit granted; I prove to 
you that in a large class of cases you take too much, and, on the other 
hand, I say that in those cases where a clerk remains on a low salary 
for a great many years, and then goes up to a high salary, and is 
superannuated on the high salary, he evidently gets from you more 
than his premium would entitle him to under the principles of equita¬ 
ble insurance.” In answer to a request of the committee that he 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 61 

explain the effect of the deductions, looking at the question as a ques¬ 
tion of insurance, Doctor Farr differentiated very clearly between the 
two questions involved in the flat-rate deductions from salary and 
the benefits provided thereby—the question of equity on one hand 
and the question of the adequacy of the contributions on the other. 
Said he: 

I have looked into that question carefully, and I will state very 
shortly my opinion upon that subject. I gather from the 27th sec¬ 
tion of the Superannuation Act that it was the intention of the Legis¬ 
lature to make the officers in the civil service pay only a portion of the 
premiums to provide for superannuation allowances, not the full 
premium. But the question of equity, which was, I believe, first 
raised by Mr. Gladstone, can only be discussed in this form: Does 
the act take from the salary of each officer quarterly the precise pre¬ 
mium which, on the principles of life insurance, will provicfe the super¬ 
annuation allowance? Is more or less deducted than the just pre¬ 
mium? The question of equity must thus arise on each case, and on 
every separate class of cases, as in life insurance, where a man of the 
age of 30 can insure £100 [$486.65] by an annual premium of £2 [$9.73], 
and if this man is compelled to pay £4 [$19.47] a year instead of £2 
[$9.73] the injustice is not repaired by another transaction in which 
a premium of £2 [$9.73] only is taken from a man of 51 years of age, 
who ought strictly to pay £4 [$19.47] a year premium to secure £100 
[$486.65] at death. It is important, then, to discuss the two questions 
separately. First, Is each civil servant dealt with as fairly and 
equitably under the Superannuation Act as a person who insures his 
life at a life office? The second question would be, Will the public 
exchequer gain or lose by the superannuation system of the Act of 
1834? That is a totally different question from the question of 
equity; the first question I answer, without any hesitation, in the 
negative. The scheme is full of injustice, for there is no definite rela¬ 
tion between the premium and the promised annuity. 

Doctor Farr then proceeded to illustrate the inequity of the scheme 
by a calculation relative to fixed'salaries, showing that in a numerous 
class of cases a great deal too much was deducted for the object con¬ 
templated. As regards ascending salaries, he showed that the deduc¬ 
tions were often much too low and often too high. He said: 

The act stops 6d. in the pound [2J per cent] on salaries not exceed¬ 
ing £100 [$486.65] a year, and Is. [5 per cent] in the pound on salaries 
exceeding £100 [$486.65] a year. What does it promise in return? 
It is not easy to reply; but it lays down a maximum allowance rang¬ 
ing in amount from three to eight-twelfths of the salary; that is, from 
15-60ths to 40-60ths, which the Treasury has practically reduced in 
many cases to 12-60ths and 32-60ths of the salary. In the calcula¬ 
tions which I am about to submit to the committee I leave out of 
account all the contributions of persons who quit the service, and I 
assume that the maximum allowance is paid, that the fifth is not 
deducted. The salaries in the public service are paid in a great vari¬ 
ety of ways, which may be referred to two great classes; first, fixed 
salaries; second, ascending salaries on a great variety of scales, as 


62 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


will be seen in the estimates of the year; sliding scales they may be 
called. I will take first the fixed salaries, on which the highest and 
many of the lowest officers are paid; they present the simplest cases; 
and I shall assume that the allowance is of the nature of a deferred 
annuity, the premium being uniform and constant. The annuity 
which the invariable premium will purchase varies, first, with the 
age of entty, and, secondly, with the age at the date of superannua¬ 
tion. Let the salary be £200 [S973.30] a year; it is difficult to form 
a calculation of this sort; I have therefore made the case as simple 
as possible, but on this case all other cases of this kind can be decided; 
then the premium will be £10 [$48.67] a year; the age of entry ranges 
from 17 to 45 years. I have returns showing the ages of entry, which 
are very various. The period of service ranges from 10 to 60 years, 
as is shown by the Table which I have submitted to the committee. 
If the age of entry is 25 years, and the period of service 40 years, the 
premium purchases £159 ($773.77), while the act allows at the utmost 
£116% ($567.76), which the Treasury rule may reduce to £93% 
($454.21). Assuming that the grant is represented by a deferred 
annuity, that is a strict calculation, which would be made on the same 
principle as a calculation for a life office. If the age of entry is 20, 
and the period of service 45 years, the premium pays for an annuity 
of £206% ($1,005.71); the act allows at the utmost £133% ($648.87), 
or, after the fifth has been deducted, £106% ($519.09). Take a high 
office, salary £2,000 ($9,733), age of entry 30, period of service 40 
years; the premium purchases an annuity of £2,349 ($11,431.40); the 
act allows £1,166 ($5,674.34). If the period of service is 45 years, 
the officer pays for an annuity of £5,229 ($25,446.93), and is allowed 
£1,333 ($6,487.04). Again, the act grants the same proportion of 
salary for two entirely different rates of premium; this is a violation 
of the principles of equitable insurance; if per cent is enough, five 
is too much; but take one of the lower offices, salary £100 ($486.65); 
age of entry, 20; service, 50 years; the premium of 2J provides an 
annuity of £99 ($481.78); the act allows £66% ($324.43"), reduced by 
the rule to £53% ($259.54). The sickness and infirmity under the 
age of 65, if real, must in nearly all cases shorten life, shorten the 
term of the annuity, and therefore diminish its value. In this numer¬ 
ous class of cases too much is evidently deducted; in another series 
of cases the deduction is insufficient. The fund may even be worked 
against the public by officers being put in young and remaining for 
10 or 15 years, and then leaving in a state of health little impaired. 
Thus by entering on salaries of £100 ($486.65) a year, and remaining 
10 years, they would pay £2 10s. ($12.17) a year, or £25 ($121.66), 
which would purchase an annuity of £1 13s. ($8.03) during their 
future lives; the annuity granted is £25 ($121.60) or £20 ($97.33), 
and you might lose £18 ($87.60) a head annually. The sliding- 
scale salary is uncertain in its operation, and varies almost in every 
office; its tendency is to raise the rate of allowance; in some cases 
the fund gains, in others it loses enormously. 

In the absence of definite data as to the age, length of service, and 
salary increases of members of the service, such as were afterward 
collected and furnished to Messrs. Ansell and Morgan, Doctor Farr was 
unable to give a positive answer to the second question, Will the 
public exchequer gain or lose by the superannuation system of the 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


63 


Act of 1834? While he said that he believed the Government would 
gain on the whole, under a strict interpretation of the act, thus con¬ 
curring in the impression which prevailed among the civil servants 
generally, he stated distinctly that his opinion was not the result of 
any strict calculation, such a calculation being impossible under the 
circumstances. He said: 

I think the committee clearly understands that the cases which I 
have put here, in a more distinct form, show that the deductions 
from a large number of the salaries will provide annuities of a greater 
amount than are actually paid under the act of Parliament. I con¬ 
ceive that in many cases the civil servants do not pay a sufficient 
sum to provide the annuity, and that is particularly the case in the 
various Kinds of sliding scales, where the salaries begin very low, and 
remain low, and then go up to the high sum on which the super¬ 
annuation is paid; but the number of those scales is so numerous, 
that it is exceedingly difficult to form any calculation as to the 
aggregate result; that is, whether the Government will gain or lose 
by the whole transaction ultimately. * * * It appears to me, on 

the whole, that the public servants pay too much. If you take the 
whole, as a class, the Government would gain rather than lose by the 
transaction, if the act of Parliament was carried out strictly; but I 
merely wish the committee to consider that as my general opinion; 
it is not the result of any strict calculation; such a calculation is, as 
far as I see at present, impossible. 

Doctor Farr pointed out too that the 5 per cent deduction had 
not been fixed on as the result of any scientific calculation. Said he: 

I have often asked on what data the rate of deduction of five per 
cent was fixed; whether any calculations had been made by the Gov¬ 
ernment; and I have not been able to ascertain that any calculations 
have been made. The first traces of this rate appear in the Act of 
1822; but the terms of that act were very different from the harder 
terms of the Act of 1834. * * * * The committee will see that the 

Government of 1834 appears not to have had any calculation them¬ 
selves in fixing this rate of five per cent. ( a ) 

While unwilling to commit himself, in the absence of a reliable 
salary scale, to any positive statement about the adequacy of the 
contributions in the aggregate to meet the charge of superannuation, 
Doctor Farr presented numerous tables to show that the value of the 
contributions was greater than the value of the pensions to all the 
faithful employees who had devoted many years to the service of 
the Government. “I think,” said he, “that the faithful public 
servant who remains at his post, undoubtedly pays more than the 
value of his pension by his deductions, but those who remain a short 
time, or go out in a state of perfect health, make an excellent bar¬ 
gain. They derive a large profit from the Government.” This was, 
however, an illustration of the inequity of the scheme and proved 
nothing as to the adequacy or inadequacy of the sum of contributions. 

a Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 173. 



64 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


Doctor Farr’s opinion that the existing superannuation scheme was 
unfair and inequitable was shared by other eminent actuaries of the 
day. Five of them signed a statement to that effect which they pre¬ 
sented to the committee in which they also upheld Doctor Farr’s con¬ 
tention that the value of the pensions was considerably less than the 
value of the contributions. This declaration was as follows: (°) 

We have examined the statements and calculations with reference 
to the pensions granted after various periods of service, to civil 
servants, and we are unanimously of opinion— 

1st. That the deductions of 2J per cent, on some salaries, and 5 
per cent, on others, are unjust, because the pensions of those who 
remain long in the service, and have paid the higher rate for a longer 
time, are virtually diminished, to make up the pensions of those who 
retire early, the larger proportion of whose payments may have been 
at the smaller rate. 

2nd. That the age of entry, and the age of receiving the pension, 
not being duly considered, those who have paid the fewest number 
of contributions may in many cases receive much more than the pro¬ 
portionate annuity; and the effect must necessarily be that the remain¬ 
ing pensioners have not the full benefit which they could obtain from 
their deductions of salary if the fund was managed on the same prin¬ 
ciples as it would be in an assurance or annuity company. 

These tables show that the average value of the pensions actually 
granted is considerably less than that of the pensions that should 
be given for the contributions deducted from the salaries of officials 
in the civil service, even leaving out of view the profits arising from 
resignations, and discharges, and the Treasury deduction of 20 per 
cent. 

J. Hill Williams, 

English and Scottish Law Life Assurance Company. 

Edwin James Farren, 
Actuary , Gresham Life Insurance Co. 

Robert Tucker, 

Pelican Life Insurance Office. 

Charles Jellicoe, 

Eagle Insurance Co. 

Samuel Brown, 

Actuary of the Guardian Assurance Company. 

Doctor Farr’s belief that the deductions from salary were more than 
sufficient to pay for the benefits under the act was also indorsed 
by every actuary called before the committee, including Thomas 
Rowe Edmonds, esq., actuary of the Legal and General Assurance 
Society of London, Charles Ansell, esq., actuary of the Atlas Insurance 
Office, and Peter Hardy, esq., actuary of the London Assurance 
Company. The fact that the careful investigation of Messrs. Morgan 
and Ansell later proved that the employees’ contributions were inade- 

°Report on Civil Service Superannuation. 1856. Appendix No. 14, p. 448. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 65 

quate in the aggregate is a striking illustration of the difficulty 
attending any rough calculations in which there is a flat-rate contri¬ 
bution made without reference to entrance age and resulting in a 
commingling of assets. 

(b) ACCRUED LIABILITIES POSSIBLE CAUSE OF INSOLVENCY IN CASE OF 

FUND. 

It is possible, of course, that with the high rate of interest then 
prevailing, the deductions of and 5 per cent might have been 
sufficient to meet the charges under the act, but for the second great 
actuarial fault in the plan, the fact that no provision had been made 
to take care of the accrued liabilities. There were naturally a great 
many elderly persons in the service in 1834 at the time of the passage 
of the act who became superannuated immediately and retired from 
the service on an allowance. There were a great many others retir¬ 
ing every year thereafter whose contributions had been small in 
comparison to the benefits which they began to receive immediately 
on retirement. Had the contribution been funded, the fund would 
have become insolvent in its efforts to carry the retirement of the 
older employees through taxation of the younger employees alone. 
It would have reached this stage soon after the investigation of 
1856, and when the employees who were young in 1829 and who had 
been contributing to the fund all the intervening years became super¬ 
annuated there would have been nothing left on which to retire 
them. Plain as the necessity for a sharp line of demarcation between 
past liabilities and future liabilities is to the student of retirement 
plans, it seems remarkable that it should have escaped the ministers 
of the British Government who brought forward the Superannua¬ 
tion Act of 1834, except that this mistake is one that has been com¬ 
mon to many ministers in other countries who have wrestled with 
the problem of superannuation and to the managers of fraternal 
benefit associations the world over. That “hindsight is better than 
foresight” was well exemplified, however, in the following colloquy 
between the chairman of the Select Committee and Sir Charles E. 
Trevelyan: 

Although the act of Parliament is very loosely worded, yet, seeing 
the statements made by the two persons charged with bringing 
forward this measure, does it not appear to you that the intention 
clearly was, that the persons contributing to the fund were to have 
an interest in that fund for their own benefit, and that it was not to 
be made a subject of debtor and creditor with the whole civil service, 
including those branches of the civil service which, previously to 
1829, had established their exemption from contribution? 

That is my view. 

Supposing the minister of the day had fairly put the question 
before Parliament thus: “Here is a service which, previously to 1829, 

35885—S. Doc. 290, 61-2-5* 


66 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

lias been chargeable upon the country for superannuation, but, in 
order to relieve the public from that for the future, we will make a 
compact with those who hereafter enter the service that they shall 
contribute to a superannuation fund;” would not then a clear separa¬ 
tion have been made between those who contributed to the fund and 
those who were entitled to claim superannuation allowances without 
a contribution? 

In those days the class of public servants interested in this matter 
hardly existed; they only commenced in the year 1829; they were 
only five years old m official life in the year 1834, when the act was 
passed; they were mere youths; their interests were not thought of; 
that parliamentary return was made out with very little regard to 
them; the question had not been raised; there had been no discus¬ 
sion about it. I conceive that if the annual parliamentary return 
had been made out according to the intention and spirit of the act, 
it would have been divided into two; the first portion would have 
been for the old servants who received the higher rate of pension, and 
whose pensions were entirely charged upon the consolidated fund, 
and who had no deduction from their salary. The other portion 
would have shown a debtor and creditor account of the receipts in 
the shape of deductions from and of the payments in the shape of 
pensions to the new class. ( a ) 

That the actuarial objections to the plan established under the Act 
of 1834 were not more generally understood was undoubtedly due to 
the fact that they were somewhat obscured by the failure of the act 
to direct the formation of a superannuation fund. Had there been 
a fund in the strict sense of the term and had the accounts been care¬ 
fully kept, the atmosphere would have been clearer, and the inade¬ 
quacy of the rates to meet future liabilities and the insufficiency of 
the fund to cover past liabilities as well would undoubtedly have 
been perceived much earlier than was the case. A great deal of the 
committee’s time was consumed in questioning witnesses and dis¬ 
cussing with them the probable meaning and intention of the Legis¬ 
lature when it passed the Act of 1834 without mention of a fund and 
the difference such a provision would have made in the claims which 
the civil servant might or might not have had on the country. It 
was estimated that in the twenty-seven years that had elapsed since 
the passage of the Treasury minute of 1829 the civil servants had 
lodged about £800,000 ($3,893,200) with the Government. A reading 
of the evidence shows that there was a deep sense of injury among the 
civil servants but no very clear perception of where the trouble lay. 

I rederick Locock of the Colonial Office wrote the Select Committee 
on April 13, 1856, in a way that suggests, however, that he at least 
felt the Government had done wrong in not investing the civil serv¬ 
ants’ money and keeping a strict account of it. Said he: 

What greater advantage * * * will accrue to the clerks 

through their savings being invested by the Government, than when 

a Report on Civil Service Superannuation, 1850. Minutes of evidence, pp. 15, 16, 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


67 


invested by themselves? Greater security, indeed, they would seem 
at first sight to gain; besides also the expenses of management being 
saved to them. But to what has this plan already practically been 
found to lead? Calculations have been made which seeni to show 
that the Government has, for these twenty years past and more, for¬ 
gotten what was the essential principle, the virtual understanding, on 
which such a plan must be framed. It has forgotten that the savings 
of a man’s income are his own property equally with the income itself. 
It has forgotten that contributions given for a special object can be 
applied to that object alone. It has forgotten to put out the deduc¬ 
tions to interest, and has not even so much as hid them in the earth, 
but has said, ‘ ‘Lo, there thou has thine own in part, but the rest I have 
given to others.” Yea, strong indeed in possession, but weak in posi¬ 
tion, it has even been driven to deny the right of the clerks to the full 
amount of their income itself. Where then is the security? Where 
the advantage? Let not the Government any longer talk of special 
reward, when even the daily wages it has withheld; for not reward, 
not bounty, not compensation is here in question, but the simple 
restitution of what is due, the rendering an account of monies 
entrusted. ( a ) 

In the absence of knowledge to the contrary, the belief was general 
that the Government had made money by taxing its employees, and 
this belief undermined the loyalty of the service. Its demoralizing 
effect was set forth in strong terms by Sir Charles Trevelyan. Said he: 

I conceive that there has been no breach of faith in reference to the 
abatements, but that the arrangement is in its nature inequitable, and 
that it belongs to that class of bad laws which are contrary to the 
natural sense of justice of mankind; in criminal jurisprudence the 
effect of such laws is that juries will not convict upon them. In civil 
administration the effect is, that they obstruct and baffle all our 
endeavors for the improvement of the civil service. However much 
we may endeavor to improve first appointments, ( b ) to establish the 
principle of promotion according to qualifications and merit, to con¬ 
solidate cognate establishments, to make a proper division of labor, 
or to fix responsibility, this question of abatements continually meets 
us, by raising discontent. Organization is a very important thing, 
but the maintenance of a proper feeling and spirit on the part of the 
public servant, is a still more important consideration; rules and sys¬ 
tems are a poor security compared with that habitual sense of duty 
which induces a public servant, under all circumstances, to do the best 
he can for the public as a faithful steward of his time and opportuni¬ 
ties; and that sense of duty can not be practically arrived at without 
the sentiment and feeling that the servants are equitably and gener¬ 
ously dealt with. 

According to general understanding in such cases, the Government 
in withholding a portion of the salary; that is, of the property of its 
servants, incurs the obligation of applying it in some manner for the 
benefit of the owner. * * * All terms of service ought to be of a 

very simple kind. Hence the impossibility of getting rid of the idea 


a Report on Civil Service Superannuation. 1856. Appendix No. 13, p. 430. 
b The Civil Service commission had just been established the year before, 1855. 



68 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

of an appropriated fund. It rises upon us continually, almost daily. 
We have always, although the act did not prescribe it so in detail, 
spoken and written, and in a great measure acted upon the supposition 
of its being an appropriation for the purpose of paying the pensions 
of the contributors. For instance, in the receipt which we give for 
our salaries at the Treasury at the end of every quarter it is said, so 
much deducted for superannuation fund. * * * But there is a 

more painful illustration of it. For years past, and to this day, we 
are continually receiving applications from widows and orphans of 
servants who have died in harness, applying to have the abatements 
restored, and they state that their fathers or husbands have paid for 
so many years, 10, 15, 20, or 25 years, those deductions from their 
authorized salaries, but that they never obtained any benefit from 
them. * * * The answer that has been always returned has been 

that the deductions were made in accordance with the act, and that 
we had no power to restore them; but nothing has been able to 
persuade these poor people that they were not unjustly dealt with. 
I lately got out a bundle of applications of that kind, and the answers 
to them for the last four or five years, a great number, and they 
alone represented a mass of discontent and presumptive grievance, 
which was enough to spoil the tone of any public sevice. ( a ) 

Defense of Act of 1834 by Men Responsible for its Enactment. 

Interesting light on the reasoning which had led to the passage of 
the Act of 1834 was given the committee by Sir James Robert George 
Graham, a member of the House of Commons, who had introduced 
the measure a quarter of a century before in behalf of Lord Grey’s 
Government and Sir Francis Thornhill Baring, a member of the com¬ 
mittee who had been a lord of the Treasury at that time. They both 
stoutly defended the act they had helped to pass in the one case and 
to interpret in the other, both in respect to the absence of a funding 
provision and the provision for deductions from salaries. Both 
stated positively their conviction that the formation of a fund was 
never contemplated by the Treasury minute of 1829, the Act of 1834, 
or the minute of November, 1834. Sir James Graham would not 
admit that the civil servants suffered any injury in consequence of the 
annual deductions not having been funded, maintaining, indeed, that 
the claim in equity of the civil servants was merely to the amount of 
superannuation laid down by the act, and administered through 
the Treasury, whether such amount were more or less than the 
deductions would provide. It was his recollection that the deduc¬ 
tions were intended to operate as a reduction of salaries, which should 
more than cover the superannuations of the parties contributing. 
Sir Francis Baring stated, on the other hand, that the reduction of 
salaries was at the time expected to be insufficient to meet the 
expenses of the superannuations, and he felt tl;at if the contrary had 
proved to be the case, it was a question of equity whether they ought 


Report on Civil Service Superannuation. 1856. Minutes of evidence, pp. 13,14. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


69 


not to be'revised. Both men were agreed that the main object of the 
act had been economy, and that a larger reduction of salaries would 
have been made in 1829 than really was carried out, had it not been for 
the imposition of the deductions. Both regarded the positive notice 
given in regard to the deductions as sufficient answer to the charge of 
inequity. 

Each of them made a statement in defense of the system, however, 
which is a sound and interesting contribution to the arguments in 
favor of a contributory plan as against a straight pension. After 
contending that the system was “the best arrangement, on the whole, 
that could have been made/ 7 Sir James Graham was asked if he did 
not think the deduction a firmer security for the continuance of the 
pensions than a mere act of Parliament, which might be abrogated 
by a future Parliament, and replied: “Infinitely more security, 
and more steadiness in its operation. This system has existed now 
for 28 years without disturbance, whereas in the short experience 
before that enactment, both Treasury minutes and acts of Parlia¬ 
ment varied almost every two or three years.” In this connection, 
Sir Francis Baring stated that “there is one great advantage for the 
civil servant in the deductions, which is, that they are a shield 
against the House of Commons in any momentary feeling of economy 
running in, and making a great alteration with regard to the retired 
allowances. That is a feeling of which many honorable members 
now around me are not aware; but I was in the House of Commons 
when that feeling did strongly exist, and I know that at the time 
this deduction was taken many of the best and wisest of the civil serv¬ 
ants, such as Mr. James Stewart, the Assistant Secretary at the 
Treasury at the time, considered it as a great advantage to the civil 
servant as a protection to him, and that he would be safe in future 
from having his retired allowances interfered with.” 

It had been argued, on the other hand, by those who opposed the 
system of abatements from salaries, that it put the Government in a 
position of less freedom in dealing with the civil servants than would 
have been the case had there been no such system of deductions. 
Sir Charles Trevelyan said: 

One incidental objection to the abatements is, that it deprives the 
Government of its freedom of action in dealing with its servants; if 
the Government itself gave the pensions from the Consolidated Fund, 
it would be able to deal more freely with all classes of public servants, 
because there would be no vested interests arising from the abate¬ 
ments. (°) 

The special interest attached to this criticism and others like it 
expressed to the committee is the fact that the speaker did not seem 

a Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 55. 





70 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


to realize that it was an attack on the lack of provision for'refund of 
deductions, not an attack on the system of deductions itself. 

Defense of Wisdom of Providing Superannuation Allowances. 

It is worthy of note that in all the mass of criticism and suggestion 
submitted to the committee there was no question of the wisdom of 
providing superannuation allowances for civil servants. On the con¬ 
trary, the policy was warmly indorsed by high and low, whether 
they argued for straight pensions or for a system of deductions. 

Doctor Farr said: 

Experience has shown that there are great advantages attending 
the present mode of remunerating public servants, partly by salaries, 
and partly by superannuation. * * * They are such as have led 

almost all the nations of Europe to adopt the system of paying partly 
by superannuation allowances. In the first' place, it is a guarantee 
of fidelity; in the second place, it encourages efficient service; in 
the third place, it retains good men in the service; in the fourth 
place, it induces men to retire when they become old or inefficient 
from any cause; and in the fifth place, it prevents old public 
servants from falling into a state of disgraceful dependence, or of 
distressing destitution, which would be a public scandal, and might 
deter young men from becoming candidates for office. These advan¬ 
tages appear to me to be so great that I should very much regret to 
see the system of superannuation abolished. (°) 

Investigation Proved Deductions Inequitable and Inade¬ 
quate. 

The Select Committee having taken evidence for three months 
finally passed a resolution on May 20, that before coming to any deci¬ 
sion they would lay the evidence before Messrs. Ansell and Morgan, 
the actuaries, with instructions that they direct their attention to 
the two debatable points so clearly indicated by Doctor Farr: ( b ) 

Whether the system of superannuation pensions and deductions 
from salaries established by the Act of 1834 is founded on principles 
of fairness and equity, in a pecuniary point of view, with respect to 
civil servants whose salaries are liable to deductions? 

Or whether the deductions taken under this act are more than 
adequate to meet the charge under the act for this class of civil 
servants ? 

On June 16, the actuaries responded that they found the system 
not established on principles of pecuniary fairness and equity. Their 
conclusion was in exact agreement with that of Doctor Farr and the 
other actuaries who had expressed their views: ( c ) 

We are of opinion that there is sufficient reason for believing that 
the present rates of deduction do press unequally on different per- 

° Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 180. 

& See page 61. 

c See page 64. 



CiVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 7l 

sons in the civil service; so that, other things remaining the same, 
those who enter the service at early ages contribute relatively more 
than those who enter late in life. 

And further, that those who, starting with equally low rates of 
salary, but who subsequently rise to the highest salaries, and there¬ 
fore become entitled to a higher rate of superannuation, do contribute 
relatively less than those who, having entered on the same low rate 
of salary, are so placed in the service as to give them little prospect 
of advancing beyond comparatively low or moderate salaries. ( a ) 

Like Doctor Farr, Messrs. Ansell and Morgan were unable to answer 
the second question without more information concerning the ages, 
salaries, and periods of service of the employees. They requested 
that elaborate data regarding the personnel of the service be pre¬ 
pared for their use. With great detail they explained their difficulty 
to the Select Committee in a letter from which the following extract 
is taken: 

In respect to the second question, of the great importance of 
which we are fully sensible, we regret to be obliged to state that we 
do not find in the papers or evidence, the data on which we should 
feel ourselves justified in answering it with a conviction that we had 
made a sufficiently near approximation to the truth; and it is our 
duty to state, that before we can arrive at such a conclusion as we 
should desire, other and additional data must be laid before us. 

The subject on which we are called upon to form an opinion, and 
to state that opinion to the committee, we consider to be far too 
important to the public service, and to the individuals comprising 
the civil service, to permit us hastily to draw conclusions from what 
appear to our minds insufficient statements of facts. * * * 

We think, therefore, that before we can form any opinion upon 
which we could ourselves rely, we ought to be furnished with returns 
from several of the large and principal civil services of the country, 
showing, 

1st. A return of all the persons now employed in the civil service 
in their respective departments, stating the nature of their appoint¬ 
ments, their present ages, and present salaries. 

2nd. A return of all the persons who have really left the service 
from other causes than death or superannuation during the last 10 
years; the dates at which they respectively entered the service, and 
the dates at which they left it; also, the salary of each at the time of 
entry and the subsequent additions made thereto, with the date of 
each addition. 

3rd. A return of all the persons who have been pensioned during 
the last 20 years; stating the dates of their entry into the service, the 
nature of their appointments, their salaries at the commencement, 
with the amount and date of each rise, the date of superannuation, 
and the amount of superannuation allowance. 

4th. A return of all those persons who were on the superannuated 
list at the time when Return No. 3 might commence; stating their 
ages at that time, and the dates of death of such persons as having 
been on that list have died, or such other details as would show the 


Report oq the Operation of the Superannuation Act. 1857. Appendix I, p. 4. 




72 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


rate of mortality which has prevailed amongst those who have been 
superannuated. 

With information of this character before us to a sufficient extent, 
we should be ready, satisfactorily to ourselves, to form a fair judg¬ 
ment on the second question submitted to us; * * * but we 

believe that delay must inevitably take place if we are to investigate 
the subject in a way satisfactory to our own minds. (°) 

This letter was written June 16, 1856. The four returns asked for 
were furnished by practically all the departments of the Government, 
and Messrs. Ansell and Morgan set to work: On March 19, 1858, 
they submitted their report, showing that the deductions made from 
the salaries of the civil servants under the authority of the Act of 
1834 were not adequate to meet the charge to which the public was 
liable under that act. Included in their report are fourteen tables 
covering a great variety of data concerning the 15,219 individuals 
comprising the British civil service. They had made “a most labo¬ 
rious arrangement of the facts communicated ” to them and pre¬ 
sented “many collateral results ’’ which they naturally thought would 
be matters of interest to the Superannuation Commission appointed 
to carry on the work begun by the Select Committee of 1856. 

Resolutions of the Select Committee. 

In the meantime, the Select Committee had agreed to certain reso¬ 
lutions, one condemning the principle of abatement of salaries, and 
one affirming the policy of a revision of salaries, with reference to the 
abatements. What they recommended therefore was not an absolute 
remission of abatements, but a qualified and conditional remission— 
that qualification and condition being that the salaries of the entire 
civil service should be revised with regard to the deduction. The 
resolution ran as follows: 

That in the Opinion of this committee it is desirable to do away 
with the system by which a portion of the salaries of civil servants is 
deducted on account of superannuation allowances. 

That, as a condition of such deductions being done away with, the 
rates of payment in the various branches of the civil service shall, 
at the earliest possible period, be revised with a due regard to the 
amount of deductions remitted, as there is no ground for an indis¬ 
criminate augmentation of salaries, which would otherwise result 
from the change proposed; that the revision now referred to shall be 
made previous to the 1st of April, 1857, when the abatements shall 
cease. 

In consequence of this action of the committee, the Government 
brought in a bill, which was introduced by the Chancellor of the Ex¬ 
chequer, Sir G. Cornwallis Lewis, at the close of the session. This bill 
proposed to remove the deductions paid by the civil servants and also 

° Report on the Operation of the Superannuation Act. 1857. Appendix I, p. 4. 





CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 73 

to reduce the salaries to the amount of the deduction remitted. The 
bill failed to meet with general approval, and owing partly to that 
cause and partly to the advanced period of the session it was with¬ 
drawn. 

SUPERANNUATION COMMISSION, 1857. 

During the Parliamentary recess of 1857, following the failure of 
the Select Committee’s bill, the Lords Commissioners of the Treasury 
proceeded to appoint a royal commission “to investigate this impor¬ 
tant subject in all its branches.” It appeared from this that the 
Government was not willing to attempt to force into legislation the 
recommendations of the parliamentary committee, but thought it 
wise to refer the matter to still another tribunal. 

Owing to the fact that it resulted in such important legislation, the 
report of this commission is worthy of special study. After reviewing 
the history of superannuation measures under the British Govern¬ 
ment, from the earliest times down to the passage of the Superannua¬ 
tion Act ol 1834, the commission considered the inequalities and anom¬ 
alies under the existing law, noted the consequent dissatisfaction of 
the civil servants, and came to the conclusion that a new system of 
superannuation must be established. 

Commission’s Reasons for Advocating a Superannuation 

System. 


There seems to .have been no doubt in the minds of the commis¬ 
sioners that it was necessary for the good of the service to continue 
the practice of retiring the superannuated on an allowance. The only 
question was as to what was the best system, and how the existing 
regulations would have to be altered in order to adapt them to the 
new system. Said they: 

The first question which presents itself with reference to this sub¬ 
ject is the expediency of providing superannuation allowances at all. 
It has sometimes been argued that the only duty of the Government 
is to offer due remuneration in the shape of salary for the services 
performed, and that it ought to be the business of the civil servant to 
make provision out of that salary for his own future wants or those 
of his family. Although this question must be considered as settled 
by the established practice of this country, and also as assumed by the 
appointment of the present commission, it may be convenient, with 
reference to our future course of argument, that we should state the 
grounds for the opinion which we hold upon it. Having regard to 
public interests alone, we think that there are ample reasons for main¬ 
taining a system of superannuation allowances. 

1st. It must be recollected that incapacity, caused by illness or 
other infirmity, may happen at any period of life, and is not a calamity 
for which it is easy to provide by means of insurance, as in the case of 
death; and it must also be borne in mind that, with a view to the due 
performance of his duty, it is important that a civil servant should feel 


74 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


himself in a safe and independent position, and that his mind should 
not be harassed or distressed by anxiety respecting his future con- 
dition. 

2nd. Supposing an assiduous and devoted public servant, who has 
spent the best part of his life in the service of the State, to become 
suddenly incapacitated by disease or bodily infirmity, public opinion 
would not allow that such a man should be permitted to starve. 
Although the want of any provision may be attributable to his own 
improvidence, this would not be considered as exonerating the Gov¬ 
ernment from making some special provision for him. Sir J. Graham 
says, in his evidence before the Committee of 1856: “I have the 
strongest opinion that whether there were any deduction made or 
not, and whether there were any specific contract made by the State 
or not, cases of such extraordinary hardship would present themselves 
on the part of faithful servants, worn out in the public service, that 
the claim for pension upon retirement would be irresistible.” Such 
cases might not infrequently occur, and an irregular and objection¬ 
able practice of making special provision for particular cases would 
thus be gradually introduced. There can be little doubt that it 
would be more for the interest of the service to establish, beforehand, 
general rules under which superannuations should be awarded; and 
it is also probable that this system would, in the long run, be found 
more economical, inasmuch as the prospect of a provision on retire¬ 
ment would be considered as a part of the remuneration for the serv¬ 
ices to be performed, and would be taken into account in regulating 
the amount of the salary. 

3rd. It is probable that, in many cases, the hardship of removing 
an estimable public servant without provision would be avoided by 
retaining him in the service after he had become incompetent to per-^ 
form his duties. This is, perhaps, the strongest argument in favor of' 
a system of superannuation. It may be true that it is strictly the 
duty of heads of departments to remove from the service all public 
officers who have become, from any cause, incompetent fully to dis¬ 
charge their duties, without regard to their feelings or their future 
position; but experience has shown that this is a duty the perform¬ 
ance of which it is most difficult, if not impossible, to enforce; and as 
it is impracticable, by any regulations, to define beforehand at what 
stage of declining health or increasing bodily or mental infirmity 
incompetence begins, the result is that, in the absence of superannu¬ 
ations, inefficient persons are retained in the public service. * * * 

The injury caused to the service by the retention of inefficient officers 
might, no doubt, be in part corrected by increasing the numbers of the 
establishment beyond what would have been required had all the 
servants been effective; but it would be impossible to justify such an 
arrangement, and under such circumstances the public service would 
be a loser for want of superannuation allowances, probably in actual 
money, and, at all events, in the less direct results. The evil conse¬ 
quences of retaining a single civil servant in an important post for 
which he has become incompetent can not be estimated in money, 
and may be much more than an equivalent for the expense of the 
superannuation of a whole department. For these reasons we are 
unhesitatingly of opinion that the public interests will be best con¬ 
sulted by maintaining a system of superannuation allowances. ( a ) 


Report on the Operation of the Superannuation Act. 1857. pp. X, XI. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


75 


Commission’s Objections to a Contributory Scheme. 

Having thus explained the grounds on which they thought it 
desirable to retain a system of granting superannuation allowances, 
they proceeded next to consider whether it was desirable to establish 
a fund for the purpose, to be supported by the contributions of the 
civil servants, and decided that it was not. Their reason for this 
decision was that experience had proved it difficult “to prescribe 
beforehand any scale of contribution which shall be so adjusted as to 
supply the requisite amount without material surplus or deficiency. 
If then, the fund should prove deficient,” they argued, “such defi¬ 
ciency must be supplied from the public revenue, and no object will 
have been gained by carrying the compulsory contributions of the 
civil servants to a separate account. If, on the other hand, the fund 
should prove to be in excess, difficult questions must arise as to the 
equitable appropriation of the surplus.” They were, therefore, dis¬ 
posed to agree with the legislature of 1834 in considering it inexpedient 
to establish a superannuation fund. 

Assuming that no such fund was to be created, the commission 
next considered whether the civil servants should be charged with 
deductions from their salaries on account of superannuations, and 
came to the conclusion that such a course was undesirable and that 
a system of “engaging public servants at a certain net amount of 
salary, with a conditional prospect of superannuation on certain 
terms,” was simpler and more straightforward. They gave as one 
of the reasons for this conclusion the opinion that a system of deduc¬ 
tions “has an injurious effect in creating an erroneous impression as 
to the real nature of the transaction. The payment of a charge on 
the salary for the purpose of providing superannuations almost neces¬ 
sarily suggests the idea,” said they, “of the existence of a fund to 
which each civil servant has contributed, and in which he, therefore, 
may be supposed to possess a certain right of property,” and they 
were led to doubt whether the impression could be entirely removed, 
except by an alteration of the system. Their other objection to the 
system of deductions was the fact that it necessarily “raised questions 
as to the sufficiency or insufficiency of the superannuation allowances 
considered as an equivalent for the deductions paid, and this not only 
with reference to the whole service, but with regard to particular 
departments, or even individual cases.” In this connection, they 
noted the complaint of individuals compelled to pay deductions, 
although from special circumstances there was little or no chance of 
their ever deriving benefit from superannuations. In short, the great 
overwhelming impression which the commissioners received of the 
system which they were investigating was of the inequalities which 
the system of deductions as administered sanctioned in the remunera¬ 
tion of different classes of civil servants. 


76 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

Recommendation that Deductions from Salary be Abolished. 

They saw only two ways of removing these inequalities—either by 
reducing the advantages of the favored classes or by improving the 
condition of the others. Feeling reluctant to interfere with the posi¬ 
tion of those civil servants entitled to full superannuation without 
the payment of deductions, they recommended as the only alternative 
the abolition of deductions, thus increasing by that amount the 
incomes of the civil servants then paying deductions. They justified 
this recommendation with the statement that “by such a measure 
the members of all the leading departments of the civil service would 
be placed on an equal footing as to salaries, inasmuch as all would 
alike receive, without abatement, the salaries which are stated to 
have been awarded to them on equal terms.” 

Besides recommending the abolition of deductions, the commission 
recommended six other changes in the system of granting superan¬ 
nuation allowances. They were: 

(1) The adoption of a new scale of retired allowances. 

(2) The reduction of the age of voluntary retirement from the 
public service from 65 to 60. 

(3) Compulsory retirement from the service at 65 years of age, 
except in certain special cases. 

(4) The application of a more liberal scale of superannuation to 
certain officers requiring professional knowledge, and the power of 
applying a special scale to other individual cases where, on the first 
appointment, it might appear, for special reasons, to be proper. 

(5) The application of the ordinary rules of superannuation to 
various officers and departments which had previously been treated 
as exceptional cases, so as to secure, so far as might be practicable, a 
uniformity of system. 

(6) The power to award gratuities or pensions in certain cases to 
civil servants who might by reason of ill health or bodily injury be 
required to retire before they had become entitled to a retired allow¬ 
ance, and to regulate the amount of compensation to be awarded on 
the abolition of offices. 

The fifth recommendation applied to the Permanent Under Secre¬ 
taries of State, the Second Secretary of the Admiralty, and the Per¬ 
manent Secretary of the India Board, who were all treated by the 
Act of 1834 as political functionaries, although those offices were 
never held by members of Parliament and never vacated on a change 
of administration. The commission held that they should be placed 
under the rules of the ordinary civil service, giving them, of course, 
the benefit of an exceptional rate of superannuation, if on inquiry 
they should appear to fall within the principles laid down. With 
regard to the judicial officers (whose pensions were regulated by 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


77 


many different acts) the commission did not think it within their 
province to decide which of them should be placed under the provi¬ 
sions of the general superannuation act; but thought that in all 
cases in which it was deemed right to place them under the general 
act they should have the benefit of the exceptional rule recommended 
above. With regard to the inferior officers in the dockyards and 
victualing yards and to certain artificers in the arsenals, who had 
complained that they received their superannuation according to an 
antiquated scale considerably lower than that applied to the ordinary 
civil service, the commissioners held that there was no good reason 
for making any one department an exception from the general rule. 
To reform the anomalies in the Department of the General Post- 
Office, the commission recommended that the system of granting 
superannuation should be revised with a view to- placing it on a 
more uniform principle. This recommendation applied also to the 
peculiar class of clerks employed in public offices under the name of 
extra clerks, although a portion of them at least had come to be 
permanently employed. The commission found that there was no 
good reason for pensioning them on a lower scale than the other 
clerks, assuming them to be permanently employed. 

Refusal of the Commission to Recommend an Insurance Fund. 

The petition of a large body of civil servants that compulsory con¬ 
tributions be required for the purpose of creating an insurance fund, 
to be managed by the civil service but under the general control of 
the Government, received very slight consideration from the com¬ 
mission. Confusing this request apparently with the idea of pen¬ 
sions for widows and children—a very different proposal—they dis¬ 
missed it in the following words: 

In some countries the provision made by the State for its servants 
has been carried still further, and has included their widows and 
children after their death. As a question has been raised in some 
of the memorials of the civil servants as to the expediency of such 
an extension of the system, it may be right to notice the subject. It 
appears to us that none of the three reasons which have been stated 
in favor of superannuation allowances apply to the case of a provi¬ 
sion for widows and children. 

1st. It is true that many civil servants may feel an equal anxiety 
for the future welfare of their wives and children as for their own; 
but against the chance of premature death there is a certain and easy 
mode of providing by means of insurance; and it can not be doubted 
that those who would suffer from anxiety on this subject would be 
likely to have recourse to this means. 

2nd. It does not appear that in this country, at least, public opinion 
would require that the civil servant should be relieved from the duty 
of providing, by insurance or otherwise, for the future support of his 
family, and that this burden should be thrown upon the State. It is 


78 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

true that sympathy has of late years been excited in favor of some 
claims for assistance made by the widows of deceased civil servants; 
but in these cases the applications were grounded, not upon a general 
claim for provision as widows of civil servants, but on the fact that 
their husbands had made large contributions under the name of 
deductions to a supposed fund, from which they had themselves 
received no benefit, and on which it was, therefore, supposed that 
their families might have an equitable claim. The third reason is, of 
course, inapplicable to the present case.( a ) 

Indifference of the Commission to Actuarial Phases of the 

Problem. 

This memorable report strikes the student of superannuation 
schemes as remarkable for two important omissions. It ignored 
absolutely all actuarial phases of the subject and it barely mentioned 
the interests of the British taxpayer. 

The most important recommendation—the abolition of deductions 
from salaries to meet the charges of superannuation—constituted a 
change of the whole system from a contributory to a noncontributory 
plan. It meant the establishment of a civil pension list similar to the 
military pension list. It meant that members of the civil service were 
to be retired thereafter out of the public revenues without cost to 
themselves. 

This momentous change was recommended by the commissioners 
because they saw the inequalities of the system in vogue, recognized 
the fact that the civil servants had just cause for complaint, and 
knew of no other remedy. Failing to perceive that fixed mathe¬ 
matical principles must underlie any sound superannuation scheme, 
and that if any given plan proves inequitable and unsatisfactory it is 
because it violates such principles, they came to the conclusion that 
the easiest and quickest way to cut what seemed to them a Gordian 
knot was to recommend a free, general pension for everybody in Her 
Majesty’s permanent civil service. 

As previously explained, the eminent actuaries who had been 
engaged by the Select Parliamentary Committee to determine 
whether the deduction made under the Act of 1834 was adequate to 
meet the charges, had found it necessary, before they could answer 
this question, to make a thorough study of the whole civil service of the 
country, classifying the members according to age, length of service, 
average and aggregate salaries, and the amount of aggregate deduc¬ 
tion to which they would have been liable under the Act of 1834. 
From this mass of data they deduced some valuable tables. With 
these as a foundation it would have been entirely possible for them to 
work out a contributory plan of retirement based on scientific princi¬ 
ples, fair to the civil servant, fair to the taxpayer, and equitable as 


Report on the Operation of the Superannuation Act. 1857. pp. XI, XII. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 79 

between different classes of civil servants. Work similar to that done 
by Messrs. Ansell and Morgan with respect to the 15,219 individuals 
of the British civil service in 1856, who were contributing from 
their salaries, has recently been performed (in 1907) by Mr. Mor¬ 
ris Fox, the government actuary of New Zealand, with respect to 
the 5,593 individuals of the New Zealand civil service, and in 1906 
by the author of this report with respect to 103,030 individuals 
of the civil service of the United States, and again in 1908 with 
respect to 170,228 members of the service, including practically all 
those classified. The task of Mr. Fox and of the author was, in 
each case, more laborious than that accomplished by the British 
actuaries of 1856, because the former were required, in the one in¬ 
stance by the Public Accounts Committee of New Zealand’s House 
of Representatives and in the other by the committees on civil serv¬ 
ice in the two houses of the American Congress, not only to make 
a classification of the members of the respective civil services as 
to age, salary, length of service, etc., but also to compute the cost 
of establishing a superannuation scheme based on sound actuarial 
principles and on the statistics of the given services. Had the British 
actuaries been asked to carry their work to its logical conclusion in 
similar fashion, they could undoubtedly, after their study of the serv¬ 
ice, have presented to the Government a superannuation scheme 
sound in principle and detail, and suited to the requirements of the 
British service, and with it a reliable calculation as to the possible 
maximum cost of putting it into operation. But the actuaries of 
Great Britain were entirely disregarded. Not even waiting to receive 
their report, and failing to perceive that the problem was a technical 
one capable of accurate and positive solution, the civil service super¬ 
annuation commissioners hastened to urge the abolition of the con¬ 
tributory system. The law establishing the pension system was 
passed before the actuaries had finished their report or before any 
one had had a chance to consider it. 

This haste of the commissioners to abolish the system of deductions 
seems all the more astonishing in view of the fact that a large number 
of the civil servants had gone on record as not averse to compulsory 
abatements from their salaries, provided those abatements were used 
to create an insurance fund—in other words, provided they were turned 
to the benefit of the contributor’s family in case of death. Doctor Farr, 
who had advised a general pension system in preference to the exist¬ 
ing contributory plan, had not asked for the complete abolition of 
deductions. He knew that that would not meet the needs of the 
situation. He had urged the straight pension only in connection 
with the diversion of deductions to the payment of insurance pre¬ 
miums. Through the half century that has elapsed since the Act of 
1859 was passed, the need of some provision in case of death before 


80 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


reaching pensionable age or just after has continued to be felt and 
to be dwelt upon. It has lately been officially recognized by passage 
of the Act of September 20, 1909. It seems strange, therefore, under 
all the circumstances, that the whole subject was not thrashed out 
with more thoroughness, with the help of the expert actuarial talent 
that was available at the time the momentous change was made. 

The indifference of the commissioners of 1857 to the actuarial 
phases of the problem is evidenced by various details in their report. 
They recommended, for instance, the adoption of a new scale of 
retired allowances, without making a single calculation as to the cost 
of such a change. They also recommended that the age of voluntary 
retirement be reduced from 65 to 60 years, without apparently con¬ 
sidering the enormous increase in the cost of annuities purchased at 
the earlier age, an increase caused by two counts, the greater number 
eligible at the age of 60 and the higher scale of values. 

Indifference of the Commission to Cost of Free Pension 

Scheme. 

The most obvious and fundamental objection to any universal 
pension scheme is that of the expense which it puts upon the people of 
the country. This well-known fact was noted by the commissioners, 
but did not deter them from recommending a general pension. Their 
discussion of that subject was confined to the following paragraph: 

The single, but not unimportant, objection to this solution of the 
difficulty is, the additional charge which it would impose on the public 
revenue. We are not disposed to treat lightly the pecuniary view 
of the question, and we are well aware of the reluctance which the 
Legislature must feel in imposing an additional burden on the public 
finances. ( a ) 

The commissioners appear to have made no attempt to calculate, 
or even estimate, the amount of that “additional charge” which they 
recommended. Convinced, apparently, that a civil pension, payable 
out of the public treasury, was the only solution of the problem which 
was puzzling them, they seemed resolved not to “count the cost.” 

REPEAL OF THE TWENTY-SEVENTH SECTION OF THE 
SUPERANNUATION ACT OF 1834, 1857. 

The report of the Superannuation Commission was submitted to 
the Treasury Lords on May 15, 1857. On June 30 Lord Naas in the 
House of Commons moved for leave to introduce a bill to repeal the 
twenty-seventh section of the Superannuation Act of 1834, which was 
the section providing for deductions from salaries. The bill met with 
opposition from the Government, but was finally passed by a large 
majority in both houses of Parliament. 

a Report on the Operation of the Superannuation Act. 1857. p. XXI. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 81 

Bill for Repeal Introduced by Lord Naas. 

In the course of his speech asking for leave to introduce the meas¬ 
ure Lord Naas reviewed the history of superannuation measures in 
England down to the passage of the Act of 1834, and then proceeded 
to point out some of “the inequalities and anomalies” of that act, 
such as the fact that out of 56,740 employed in the civil service, 
at salaries amounting in the aggregate to £5,595,000, ($27,228,067) 
only 15,311 were subject to abatements; the other 41,429, whose 
salaries amounted to £3,172,000 ($15,436,538), were guaranteed their 
pensions, but suffered no abatements.” In addition to these ine¬ 
qualities, he considered that there were three weighty objections to 
the whole system of the civil service: First, that the civil servants 
were not altogether sufficiently remunerated, the average pay being 
only £141 ($686) per annum, and of two-thirds of that number the 
average salaries amounted to but £86 ($418) per annum; second, 
that many of those who contributed to the fund did not get any 
benefit from it, the most delicate calculations of all the actuaries in 
the world not being able to persuade the six out of the seven who 
never received any allowance that they were fairly treated; and third, 
the fact that the amount of reduction was more than equal to the 
whole superannuation paid, the tax amounting to upward of £66,000 
($321,189) a year and the allowances paid to only about £11,000 
($53,531), and the entire contributions of the civil servants during 
the twenty-seven years the act had been in operation to £900,000 
($4,379,850), of which £80,000 ($3,893,200) only had been returned 
to the contributors in the shape of allowances, leaving a balance of 
£820,000 ($3,990,530), which if it had been funded would have 
amounted to £1,000,000 ($4,866,500). Lord Naas referred in terms 
of warm approval to the report of the Superannuation Commission, 
saying that, considering the high position and experience of the com¬ 
missioners, and the long time that the question had been debated, 
he was justified in looking at their decision in the light of an arbi¬ 
tration between the civil servants and the Government. On their 
decision he rested his wdiole case, and he craved the attention of the 
House to this very important passage of their report (which is the 
one usually quoted wherever authority is sought for a sweeping 
condemnation of contributory systems, but which seems to the stu¬ 
dent only a frank confession of the commissioners’ puzzled and 
baffled consciousness). 

It has not been without much anxious consideration that we have 
arrived at the conclusion that it is our duty to recommend the aboli¬ 
tion of deductions for the purpose of superannuation, without any 
corresponding reduction in the salaries on which such deductions 
have been charged. Our first impression in entering on the inquiry 
referred to us was adverse to this arrangement; but on a careful 
review of all the difficulties of the case we became satisfied that, with 
a view to public interests alone, we could recommend no other set- 
35885—S. Doc. 290, 61-2-6* 


82 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


tlement of the question as likely to be permanent and satisfactory. 
We are aware that the present system of deductions has had high 
authorities in its favor, and at the time when it was introduced it 
may have been considered a convenient mode of carrying into effect 
the unpopular measure of a general reduction of salaries. Never¬ 
theless, for the reasons which we have already stated, we believe it 
to be unsound in principle; and we think that its inherent defects 
have developed themselves in difficulties of administration of which 
the effect has been to create a mass of anomalies and inconsistencies 
most injurious to the public service. In this as in other similar cases 
it may be found impracticable to escape from a vicious principle and 
to establish a reasonable and uniform system without some tempo¬ 
rary pecuniary sacrifice; but believing that there is no other satis¬ 
factory solution of the difficulty, being confident that the ultimate 
advantage of the public will be much more than a compensation for 
any possible temporary loss, and having regard to the importance 
of maintaining the character and efficiency of the civil service, we 
are of opinion that by the recommendation which we have made 
we shall best discharge the duty which has been assigned to us.( a ) 

Lord Naas said, in conclusion, that he thought he had shown that 
there was a sufficient reason for the immediate abolition of the super¬ 
annuation tax, and as the Government declined to do anything in 
the matter, he called upon the House to support his bill. The remedy 
which he proposed was to introduce a bill containing but one clause, 
repealing the twenty-seventh section of the Act of 1834, which author¬ 
ized the deductions. This course, however, he said, would not pre¬ 
vent the Government from imposing such conditions as they might 
deem necessary. 

BILL OPPOSED BY THE MINISTRY. 

To the student of the subject it would seem that Lord Naas had 
given sufficient proof of the anomalies and inconsistencies of the law, 
but had hardly shown that the abolition of deductions was the cor¬ 
rect and only remedy for them. This failure of Lord Naas was 
pointed out by Sir. G. Cornwallis Lewis, the Chancellor of the Ex¬ 
chequer, who rose to the defense of the Government, saying: “The 
subject is too wide, the questions involved are too large, the civil 
service, whose interests are affected, is so important, and the sum of 
money which the noble lord proposes to vote away is too great to 
allow me to be silent on this occasion. ’ ’ After reviewing the course 
of previous legislation he concentrated his arguments on the sensible 
plea that no piecemeal legislation should be enacted by the House, 
but that the subject should be considered, as a whole, in all its bear¬ 
ings, and action taken only after the actuaries’ final report had been 
submitted and the subject thoroughly discussed in the light of that 
report. He said that: 

The question which now arises is whether the House shall at once 
proceed to repeal the clause in the Act of 1834 without any further 

° Hansard’s Parliamentary Debates, 3d series. CXLVI, pp. 690-698. 






CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 83 

legislation on the subject, merely upon the suggestion of the facts 
brought under their notice to-night. The noble lord did not state to 
the House that the recommendations of the commissioners involved 
a great number of questions which do not belong strictly to the sub¬ 
ject of these abatements, and if he founds his case upon the report of 
the commissioners he is bound to give effect to the whole of their 
recommendations. * * * Another part of the question which 

must be considered is the great magnitude of the sum involved, and 
the importance of not taking a hasty step or legislating on imperfect 
information on account of the large pecuniary interests which are .at 
stake. * * * I am perfectly willing to concede to the noble lord 

that the present system, under which superannuation allowances are 
granted, is full of anomalies and inconsistencies, and that the present 
rule with respect to the abatement is far from satisfactory. I can not 
admit, however, that the creation of a fund was ever promised, either 
by Parliament or by the Government; neither can I admit that there 
has been any breach of a contract by any Government. The com¬ 
missioners themselves distinctly state their opinion that no such 
breach of contract has taken place, and that the civil servants have 
no claim on the ground of equity for the proposed change. The 
commissioners recommend the change on the ground of expediency. 
They say, “the system is a bad one; you must pay forfeit for the 
abolition of it; you can not get rid of it without surrendering £60,000 
($291,990) or £70,000 ($340,655) a year, and we think the system is 
so bad that we advise you to abandon it, even at that cost.” I admit, 
then, that the system is a bad one, and I regret that it was ever intro¬ 
duced. * * * Looking, then, to the extensive consequences of 

the simple alteration of one clause which the noble lord proposes, and 
considering the necessity of legislating upon this subject—if it is to 
be legislated upon at all—in a more comprehensive manner and with 
a wider regard to consequences than is now proposed, it is not in my 
power to vote in favor or the motion of the noble lord. I would also 
say that I do not see how the Government would be justified in 
undertaking to do anything with regard to this question until the 
report of the actuaries has been received. The subject is now under 
the consideration of the actuaries, and the commissioners promise 
the result in a supplementary report. Under all the circumstances 
then, and looking at the position in which the question stands, I do 
not see how it would be possible for me to accede to the motion of the 
noble lord. It is for the House to say whether the question can be 
decided in this summary manner, and whether, as guardians of the 
public purse, considering the large sum of money involved in this 
motion, they think themselves justified in deciding in favor of it.( a ) 

The Chancellor of the Exchequer assented to the introduction of the 
bill, however, on the understanding that the object of such concession 
was merely to give an opportunity for fuller discussion. The bill 
was accordingly read for the first time. 

On the motion for the second reading of the bill, on July 23, Mr. 
Wilson, then Secretary for the Treasury, stated the reasons for the 
Government’s opposition to the bill. Taking up, first, the general 
belief that the contributions which the civil servants of the Crown 


“Hansard’s Parliamentary Debates, 3d series. CXLVI, pp. 703-707. 






84 


PIVIL-SEEVICE RETIREMENT IN GREAT BRITAIN. 


had made toward their pensions were considerably larger than neces¬ 
sary to provide for those pensions, he said that he was prepared to 
admit that if that case could be established, whatever the terms of 
the compact, it would be politic to abandon the charge or at least to 
reduce the charge to what was merely sufficient to provide the pen¬ 
sions. Repudiating the idea that there had been any breach of 
engagement on the part of the Crown with the civil servants, he next 
said that the whole question resolved itself into one of policy, and that 
it had been justly stated in the report of the commissioners that, 
after all, this was a question of the remuneration of public servants, 
and that the claim of pension could not be separated from the 
amount of salaries. Reviewing the salary question, Mr. Wilson 
argued that if there were injustices in the matter of remuneration 
paid different classes of employees, those injustices would only be 
increased by the general abolition of abatements from salaries. 
He said that: 

Although the insufficient remuneration of public servants might 
be a just ground for revising the scale of salaries, it could be no reason 
for an indiscriminate increase of salaries, without regard to merit 
or efficiency. The proposition of the noble lord would amount to 
an indiscriminate increase of salaries throughout the public service 
to the extent of 5 per cent upon salaries exceeding £100 and £2 10s. 
per cent on salaries below that amount. Now, supposing some por¬ 
tions of the public service were at present underpaid, an increase of 
2§ or 5 per cent upon the existing salaries might be quite insufficient 
to raise those salaries to a proper amount; and would it be any sat¬ 
isfaction to persons in such a position to receive this increase when 
the same increase was given to a large body of public servants who 
could not complain of being underpaid ? Some years ago a proposal 
was made to reduce the salaries in all public departments by a 
uniform rate of 10 per cent, and that proposal was opposed on the 
ground that if any portion of the public servants were overpaid it 
would be proper to reduce their salaries, but that the indiscriminate 
reduction proposed was neither just nor reasonable. * * * There 

was one point to which he begged to call the serious attention of the 
House. Until the noble lord introduced this bill no proposition had 
ever been made to give up the abatement unaccompanied by a revision 
of salary. ( a ) 

Coming to consideration of the bill itself, Mr. Wilson attacked it 
as bound to create an anomaly greater than any which now existed. 
He showed that the commissioners had pointed out existing anomalies 
without end, with not one of which the bill proposed to deal. Said he: 

It proposed to repeal a single clause in the Act of 1834—the clause, 
namely, which imposed the abatements. The noble lord left the 
act in every other respect as it was. Now, the effect of that act was 
that certain persons only were entitled to pensions. The bill of the 
noble lord sought to relieve these persons from the payment of abate¬ 
ments, but it did not propose to give pensions to any other class of 
public servants. The officers of the Poor-Law Board were not entitled 

°Hansard’s Parliamentary Debates, 3d series. CXLVII, pp. 249-253. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 85 

to pensions, and they felt that they had no reason to complain, 
because they were not required to pay abatements. The officers 
of the Treasury, on the other hand, were entitled to pensions, and 
therefore they had no right to consider themselves aggrieved in 
being called upon to pay abatements. Under the bill of the noble 
lord the officers of the Treasury would continue to be entitled to 
pensions, although relieved from the payment of abatements; while 
the officers of the Poor-Law Board would not be more entitled to 
pensions than they were at the present moment. Nothing could be 
more unjust than such a distinction. If all public servants were to 
be put upon the same footing with regard to abatements, so ought 
they also with respect to pensions; and if the bill of the noble lord 
passed, it would be impossible to resist their demand. * * * 

That bill, if passed, would destroy the line of demarcation between 
those who were and those who were not entitled to pensions. It was 
proposed that they should then give up a sum of £100,000 ($486,650) 
without any discrimination, to public servants; but he would answer 
for it that if that proposal were adopted they would have to add 
another sum of at least £250,000 ($1,216,625) for pensions to persons 
who were not at present entitled to receive them. He would go 
farther and express his belief that, under that proposed arrangement, 
they should look forward to an addition to the public expenditure 
of not less than from £300,000 ($1,459,950) to £400,000 ($1,946,600) 
in the course of the next eight or nine years. (°) 

Mr. Wilson closed his speech by declaring that the question was 
not between the civil servants and the Government, but between 
them and the taxpayers of Great Britain. He therefore hoped that 
if the House of Commons, judging between their constituents, the 
taxpayers, and the civil servants, should decide that the latter were 
inadequately paid and that therefore they were justified in throwing 
away £100,000 ($486,650) a year directly, besides some £300,000 
($1,459,950) or £400,000 ($1,946,600) a year indirectly, they would 
be equally willing, when they had forced the Government into a 
corner and it became necessary to propose new taxes for meeting 
that increased expenditure, to support the Government in adding to 
the income tax or imposing any new tax that might be required to 
equalize the expenditure and the means of the country. 

Debate on the Bill. 

At the close of Mr. Wilson’s speech, Mr. Weguelin, who had been 
one of the commissioners who inquired into this subject, spoke in 
favor of the bill and against the arguments for delay urged by the 
Chancellor of the Exchequer and the Secretary for the Treasury. 
He said that: 

Another reason urged for delay was the non-presentation of the 
report of the actuaries. He could not understand why that should 
be urged as a reason. If the abatement had accumulated, and the 
Government admitted that a fund had been created, the case would 
be different. But if they said the clerks among themselves had no 
right to the principle of mutual assurance, he could not tell why they 


« Hansard’s Parliamentary Debates, CXLVII, pp. 256-257. 



86 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

should wait for the report of the actuaries. The appointment of 
actuaries necessarily assumed that there was a fund—that the de¬ 
ductions paid by other classes had formed a fund out of which to pay 
the superannuations. They were then in this dilemma; either there 
was a fund, which was contrary to the statement of the honorable 
gentleman, or if not, then there was no occasion to wait for the report 
of the actuaries. He thought the real question for the House of 
Commons was, as to the policy of continuing these abatements. 
Everybody, when they came to examine the matter, abandoned 
them. The committee appointed to investigate the matter had 
thrown them over; the commissioners had given them up; every 
debate in the House had been conducted on the principle of the 
abandonment of the system of abatements, and the real question 
now before the House appeared to him to be, whether or not there 
ought to be an increase of salary on account of these deductions. 
That question of salary he admitted the House were incompetent to 
enter into; it must be left to a committee of the Treasury. Judging 
from what he saw around him, he believed that salaries generally 
were on the increase. He knew they were in commercial concerns; but 
with respect to that the right honorable gentleman made a statement 
which was not exactly in accordance with the fact. He stated that 
the average salaries at the Bank of England were lower than the 
average salaries paid to the civil servants. The general average, 
however, in the Bank was £195 ($948) per annum, whereas in the 
civil service it only amounted to £147 ($715).(°) 

The position of the Government was next defended by Sir Francis 
Baring. As one of those responsible for the passage of the Act of 
1834, he was naturally inclined to defend the system of deductions, 
but he nevertheless conceded that the question of deductions had 
been settled, the Government having yielded that principle. The 
real question, he maintained then, was not about deductions, but 
the second reading of the bill, and to that he had objections. Not 
only did he object to the bill because it would be no settlement of 
the question, but because it would make a large increase in the sala¬ 
ries of the public servants in a manner not required, and at the same 
time most injudicious. They were going to increase the higher serv¬ 
ices by 5 per cent, and to increase the salaries of the lower class of 
civil servants, by only 2£ per cent. The bill, therefore, gave advan¬ 
tage to the highest and best-paid class of public servants, which it 
withheld from the poorer and hardest-working servants. 

Mr. Seymour Fitzgerald, who had been a member of the Select 
Committee, defended Lord Naas’s bill on the general ground that the 
civil servants had just cause for complaints, and that members of the 
House should be ready to face the extra expense for the sake of the 
extra advantage from the increased efficiency of the public service. 

An energetic speech against the bill was made by Mr. Rich, who 
said it was “imperfect in its form, would be unjust in its operation, 
was quite unnecessary, based upon erroneous statements, involved 

“Hansard’s Parliamentary Debates, CXLVII, pp. 268-269. 







CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


87 


an extravagant expenditure of the public money and recognized a 
breach of contract .” He said the question was not one of abate¬ 
ment, which had been inquired into and decided against; but it was 
a question whether £100,000 ($486,650) a year should be added to 
the salaries of the best paid of the public servants. 

Lord Naas next took up the debate, answering the attacks mad^ 
on his bill by the members of the Government. Particularly inter¬ 
esting to the student of retirement plans are his conclusions, based 
on the opinions of the several actuaries, who had testified that the 
average value of the pensions received was less in individual cases 
than what the contributions would have purchased. It has been 
shown that this opinion was perfectly sound, but it is also known 
(what Lord Naas was unwilling to wait to find out) that the actuaries 
then investigating the matter discovered that the contributions 
would be inadequate in the aggregate to pay the pensions promised. 
Lord Naas said that: 

The Secretary for the Treasury (Mr. Wilson), whose motives in 
opposing the bill no one could doubt were very proper, had, however, 
made some statements of facts and figures in a manner which tended 
to create a false impression. The honorable gentleman had stated that 
there was “an impression” abroad that the civil servants of the 

E ublic were called upon to pay more in deductions than they received 
ack in pensions. That was not “an impression;” it was a distinct 
matter of fact, and it could be proved beyond all dispute that the 
contributions of the civil servants far exceeded in amount the pen¬ 
sions that were granted to them. That matter ought to have been 
set at rest after the evidence which had been taken before the com¬ 
mittee which sat last year upon the subject. They examined Doctor 
Farr, Mr. Edmonds, and Mr. Hardy, actuaries of the highest emi¬ 
nence, and documents were produced showing that six other dis¬ 
tinguished actuaries agreed with them in an opinion that the average 
value of the pensions actually granted was considerably less than 
what should have been given in return for the contribution paid by 
the civil servant, even omitting all profits arising from resignations 
and discharges. It was true that an inquiry was going on, or was 
supposed to be going on, directed in some measure to that point; but 
the evidence before the House would lead them to believe that it was 
unlikely there would be any different conclusion arrived at than had 
been come to by the committee. 

Lord Naas closed his remarks with the argument that the system 
of abatements had been generally condemned and the House would 
do well to recognize that fact and act at once, rather than wait and 
allow the dissatisfaction of the civil servants to become intensified. 
He said that: 

Those who complained that the measure did not settle the whole 
question nor embrace the whole recommendations of the commis¬ 
sioners ought to bear in mind that their great leading recommendation 
was contained in his bill. If the bill did not sweep away all the 
anomalies and inequalities that existed, still it swept away the most 
grievous anomaly, and he believed it would pave the way for the 


88 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


abolition of all the others. But the question he had now to ask was, 
what did the Government propose to do ? * * * He wished to 

know from the right honorable gentleman the Chancellor of the 
Exchequer whether the Government meant to set their face once and 
for all against every attempt to do away with the abatements made 
for superannuation allowances ? His decided opinion was that they 
must make up their minds to do away with these abatements or not 
deal with the question at all; unless they made the principle of non¬ 
abatement the root of their measure it would be unsatisfactory to the 
civil servants, and, he believed, to the House and country. The 
system had been condemned by that House, by the press, and by 
the good sense of the people of this country. * * * It had been 

condemned by a committee of that House, which had given long 
consideration to the subject; and lastly by a royal commission, 
whose report should be looked at more in the light of an arbitration 
than anything else. In fact, the whole system of taxing salaries 
stood condemned; and although there might be honorable members 
who thought the system just and proper, he trusted that with the 
weight of authority to which he had alluded to support them, the 
Government would put the matter on a satisfactory footing. The 
continuance of the existing system caused great dissatisfaction among 
a large and important body of public servants whom it was most 
desirable to keep contented. They felt they had a grievance to com¬ 
plain of, and the House might depend upon it they would not be 
satisfied till that grievance was removed. The agitation would go 
on, and they would not rest contented with less than was now pro¬ 
posed for the relief. Next year the demands of the civil servants 
instead of being lessened might be enlarged; and the House might 
find that it was not one grievance only they were called on to redress. 
We boasted in this country of the stability, the firmness, and the 
integrity with which the business of every department was conducted. 
These we owed very much to the exertions and abilities of the civil 
servants of the Grown, and when they were told by high authorities 
that this class labored under an oppressive grievance he maintained 
that the House ought to redress it at the earliest possible opportunity, 
and he trusted the House would, by accepting liis bill, put an end to 
the grievance at once, and thus confer a boon and recognize a right. ( a ) 

One of the strongest speeches against the bill was made by Mr. 
Gladstone, who took exception particularly to Lord Naas’s statement 
that the system of deductions was a condemned system, and who 
pointed out that the matter could not be cleared up before the report 
of the actuaries was received. Said he: 

It is stated or assumed that the system of making deductions from 
the salaries of the civil servants with a view to providing funds for 
superannuation is a system which has been condemned on all hands. 
It has been condemned, it is said, by a parliamentary committee, by 
the royal commission, and it is assumed to have been condemned 
by the Government. It was condemned, I am sorry to say, by the 
parliamentary committee—I greatly regret that such should have 
been the case—it has been condemned by a royal commission, which 
I look upon as being of less authority; whether it has been condemned 
by the Government or not I am not aware. But the system which at 

a Hansard’s Parliamentary Debates, CXLVII, pp. 649-656. 






CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 89 

present exists was founded under recommendations entitled to quite as 
much weight as any of the recommendations which have been made 
in the opposite direction. 

Mr. Gladstone then quoted the opinions of such eminent men as 
Sir James Graham, Mr. Tierney, Mr. A. Baring, Lord Althorp, Mr. 
Herries, Mr. Gouldburn, and Sir Henry Parnell to prove that the 
policy of making deductions from a salary as an equivalent for a 
prospective superannuation is “sound in principle and in effect is 
excellent.” He said that: 

They were men, most of them among the most experienced ad¬ 
ministrators of their day, and one or more of them had originally 
belonged to the permanent civil service. The weight of testimony, 
therefore, in favor of this system is sufficiently strong, not perhaps to 
induce you to maintain it under all circumstances, but at least en¬ 
tirely to deprive the noble lord of the right of saying that it is a 
condemned system. The noble lord and those who go with him 
argue that the pensions which are to be awarded out of the fund ac¬ 
cumulated by the deductions will not in the long run exhaust the 
whole proceeds of the fund. In the first place, that fact has never 
been proved, and if it had it would not affect the question. The 
noble lord quoted these opinions of certain actuaries, and he says 
that these opinions ought to settle the question; but the noble lord 
was very glad to fall back upon the royal commissioners as arbitra¬ 
tors when it suited the purposes of his argument. But the royal com¬ 
missioners do not state that this was a settled fact; on the contrary, 
in the last page of their report, they treat it as a matter not yet 
cleared up. The committee of last year did not treat it as a question 
which was decided. The right honorable gentleman the member for 
Portsmouth (Sir F. Baring), a great authority, is distinctly and 
strongly of opinion that the money value acquired in respect of pen¬ 
sions is greater than the money value paid in deductions. 

Believing thus, that there was a great weight of expert authority 
on the side of the system of deductions as against it, and that the 
matter was not yet settled, Mr. Gladstone opposed the bill chiefly on 
the ground that what it really proposed was an indiscriminate increase 
of salaries and that such increase was not justified. Said he: 

It is all very well to come down here and say with a chivalrous air 
that it is beneath the House of Commons to inquire what is the value 
of labor in the market—that we ought to be above such consideration 
in fixing the payments of our public servants. That would be all 
very well if we were dealing with our own private fortunes, but we 
happen to be dealing with the public taxes. The bulk of these taxes 
are levied upon the wages of the laborers of England, which are regu¬ 
lated by supply and demand; and if the laborer, whether artisan, 
mechanic, or peasant, can obtain no more than his labor is worth in 
open market, what right have we to make deductions from the fruit 
of his labor, and deliver them to servants of the Crown, according to 
our own ideas of generosity ? There is no doubt that the civil servant 
gets at least what his labor is worth in the market. Here let me draw 
a distinction. There is a labor so valuable that you can not pay for 


90 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


it in money. There are men who devote themselves to the civil 
service with so much enthusiasm, with such ability, and with such an 
entire absence of the ordinary motives which a prospect of fame 
affords, that it is impossible to commend or to pay them too highly 7 -. 
Men of that order we must set aside. You may give them salaries 
which are liberal according to the estimate of the world, but I grant 
that such salaries, even in the present liberal humor of Parliament, 
must fall far short of the value of the services which these persons 
render. I am not here to discredit the civil service in general. At 
the same time I must say that, so far as my experience has gone, the 
civil servants of the Crown are not only not an ill-paid, but are, hav¬ 
ing reference to their great mass, a well-paid body of servants. Recol¬ 
lect what has happened within the last two years. There is no reason 
to suppose that the candidates presented for employment in the civil 
service during that period have been inferior to those presented in 
previous years; but the establishment of the test of an independent 
examination has led to the rejection of one-third of them as unfit to 
enter the civil service of the country. At any rate, there is no doubt 
that these persons do not enter the civil service by compulsion. 
After listening to the debates in this House one would really suppose 
that the ballot, which has been abolished as regards the militia, had 
been established for the civil service; that every parish, every hun¬ 
dred, was called upon year by year to supply two or three young men 
for that service against their will; and that the grievance of receiving 
only £141 per annum, taking tidewaiters and all together, was so 
great that there would be a market for substitutes, and that large 
payments would be made to induce persons to relieve the individuals 
chosen by ballot from this frightful evil. It would be needless to 
detain the House with a description of what is really the state of the 
case; but, while the quality of your candidates is improving, and 
their quantity undiminished, I want to know what will be our justifi¬ 
cation to the taxpaying constituencies, to the laboring classes of 
England, if we accede to the representation of the noble lord and pass 
a bill which, without reference to merit—on the contrary, with a 
decided preference of the higher classes of officers, to whom we are to 
make a double payment—will place a certain sum in the pocket of 
every civil servant. (°) 

Mr. Disraeli made a speech in support of the bill, taking the stand 
that the principle of abolition of deductions in the salaries of a certain 
class of public servants had received the sanctions of three great 
authorities, a Parliamentary committee, Her Majesty’s Government, 
and a royal commission, and should therefore be respected. He 
stated his agreement with Mr. Gladstone that, considering not only 
the present state of finances, but the gloomy future in prospect with 
regard to expenditure, it would be most unwise thoughtlessly to 
increase the expenditure of the country, but he said that “no one 
should refuse to perform an act of justice on considerations of mere 
economy.” Mr. Disraeli, in conclusion, expressed his belief that the 
operation of the measure, if it became a law, would be “virtually to 
settle this important question.” 

a Hansard’s Parliamentary Debates, CXLVII, pp. 655-665. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


91 


In this debate on the motion for a second reading of the bill, the 
Chancellor of the Exchequer, Sir G. Cornwallis Lewis, again made an 
attempt to show the House that hasty action was inadvisable, since it 
had not yet been proved by competent authority (that is, by the 
actuaries) that the civil servants had been unjustly treated. Said he: 

The committee had a large amount of evidence brought under their 
consideration, and not being able to make up their minds as to that 
which I may term the question whether the deductions which had 
been made from the salaries of the civil servants were or were not 
greater in value than the pensions to which they would become en¬ 
titled as an equivalent—resolved to refer the matter to two actu¬ 
aries, who were to be furnished with the whole evidence, and to report 
thereupon. The noble lord, the member for Cockermouth (Lord 
Naas), has indeed quoted the testimony of the actuaries who were ex¬ 
amined before the committee, to prove that its members were satis¬ 
fied with the information which had been laid before them; but I 
appeal to the recollection of those honorable gentlemen who were 
members of the committee to corroborate the statement which I have 
made, that the committee, not being satisfied with the evidence before 
them, came to a deliberate resolution to refer the question for the 
report of two actuaries specially selected, who were to be furnished 
with the evidence for that purpose. I therefore entirely dispute the 
statement that the Select Committee were satisfied upon the ground 
of equity and justice. The result of the investigation of the commit¬ 
tee was, in my opinion, to leave the question of insurance quite unde¬ 
termined, and I may add that their labors were brought to a close 
before the report of the two actuaries to whom the point had been 
submitted could be received. The claim of the civil service has, 
nevertheless, been reargued in this House upon the ground of justice 
* * *. Now, I utterly deny the validity of the claim of the civil 

servants upon that ground. * * * I maintain that the contract 

which was entered into with them by act of Parliament is, in its 
terms, perfectly clear and precise; that every one of them who has 
taken office since the passing of that act has accepted it upon condi¬ 
tions which were well known; that those conditions have been strictly 
adhered to by successive governments; and that it is absolutely im- 

E ossible to prove that even if a fund had been created, any additional^ 
enefit to the members of the civil service would be the result. 

The Chancellor then went on to show the enormous additional ex- 1 
pense to which the country would be liable in case the bill passed and 
to combat the statement as to the general insufficiency of the salaries 
paid civil servants. In conclusion, the Chancellor said: 

This brings me to the last point which I have now to put before the 
House, namely, whether they are prepared to agree to the measure pro¬ 
posed by the noble lord, which involves the simple and unconditional 
abolition of the deductions now made from the pay of the civil service. 
I have already stated my opinion that the right of the civil service to such 
a concession can not be established; and in the official position which I 
hold, I do not feel myself j ustffied in asking the House to be generous with 
the public money. * If the House think fit to perform an act of liberality 
and generosity, it is no doubt competent for the House so to act; but it 


92 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


would ill beseem me, as Chancellor of the Exchequer, to propose any 
increase in the salaries of the civil service, except upon the ground of 
justice, or of the insufficiency of the present scale of remuneration. 
No doubt it is perfectly competent for the House of Commons, if it 
think fit, in a spirit of gratuitous liberality, to bestow upon the civil 
servants of the country this annual sum in addition to their existing 
salaries, and to diffuse the increase rateably over the whole service 
without any reference to individual merit, or to any augmentation in 
the amount of work performed. On the other hand, if the House is 
not disposed to take that step, they may accompany the remission 
of these abatements by the principle which was adopted by the com¬ 
mittee of last session—that is to say, they may call on the Government 
to make a reduction in the salaries equivalent to the abatements re¬ 
mitted. In that manner either the whole or a considerable part of 
the deductions to be abolished would be recovered in the shape of 
a diminution in the regular rate of pay. That, however, is a matter 
entirely for the House to consider. For my own part, standing in 
the situation which I have the honor to fill, I see no sufficient ground 
to justify me in acceding to the proposition of the noble lord.( a ) 

Vote on the Bill. 

Following the Chancellor’s speech, the question was put and a 
division of the House resulted. The second reading of the bill was 
carried by a majority of 60 in a house of 282, all the members of the 
administration voting with the minority. 

On July 30 Mr. Seymour Fitzgerald asked the First Lord of the Treas¬ 
ury what course the Government proposed to pursue with reference 
to the civil service superannuation bill, the second reading of which 
had been carried the previous day by so large a majority. 

To this Viscount Palmerston replied that Her Majesty’s Govern¬ 
ment felt it their duty to state to the House at considerable length 
the objections they felt to the bill proposed by Lord Naas, consider¬ 
ing that the effect of it would be to add a very large sum to the 
annual expenditure of the country, but the House having in a very full 
attendance and by a very considerable majority confirmed the second 
reading of the bill, the Government would not deem it respectful to the 
House to offer any further opposition to the progress of the measure. 

Mr. Gladstone then asked whether it was the intention of the Gov¬ 
ernment to institute any revision of the salaries of persons holding 
offices in the civil service in connection with the removal of the 
deductions to which they were liable. In answer to this question, 
Viscount Palmerston stated that the effect of the bill would be to 
add 2 \ per cent in some cases and 5 per cent in others to those sal¬ 
aries, but the only revision that would naturally arise out of it would 
be a revision by which the salaries would be diminished in propor¬ 
tion to the alteration made by the bill, and that that would hardly 
be consistent with the decision of Parliament. 

a Hansard’s Parliamentary Debates, CXLVII, pp. 673-682. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


93 


When the motion for the third reading of the bill was put, the 
Chancellor of the Exchequer protested, for the last time, that he was 
not prepared to bring in a bill before he received the report of the 
actuaries who had been appointed, and he charged Lord Naas with 
undue impatience in trying to secure for the public servants “ benefits 
to which in a spirit of good-natured credulity he considered them to 
be entitled.” 

Sir John Trelawny then said the reason he had opposed the bill 
was because he wished to protect the national exchequer. The bet¬ 
ter plan, he thought, would have been to appoint a committee to 
inquire into the whole of the civil service. 

Mr. Berkeley said he was surprised to hear Lord Naas accused of 
good-natured credulity. The Government might more justly, he 
thought, bo accused of ill-natured obstinacy. “Nine out of every 
ten men in cities,” said he, “are in favor of the noble lord’s bill.” 

Finally, Mr. Ayrton said he must complain of the undue haste 
with which the bill had been pressed forward, and the extraordinary 
zeal which the civil servants had exhibited in soliciting members to 
support it. “The measure, in short” said he, “is the result of an 
organized conspiracy on the part of the public servants, is unjust in 
its provisions, and based on erroneous statements.” 

The question was then put and the third reading of the bill was 
carried by a majority of 68. During the same session there were 
short debates in the House of Lords respecting the report of the 
royal commission, and it was very evident that the lords were almost 
unanimously in favor of the abolition of abatements. 

Text of the Repeal. 

The act as finally passed was very short and read as follows: 

An act to repeal the twenty-seventh section of the superannuation 
act, 1834. 

Whereas an act was passed in the fourth and fifth years of the reign 
of his late Majesty, intituled: “An act to alter, amend, and consolidate 
the laws for regulating the pensions, compensations, and allowances 
to be made to persons in respect of their having held civil offices in 
His Majesty’s service;” and whereas it is expedient to enforce the 
provisions of the said act, so far as relates to the abatement to be 
made under the twenty-seventh section of the said recited act from 
the salaries of those civil servants of the Crown who have taken office 
since the 4th day of August, 1829; be it therefore enacted by the 
Queen’s Most Excellent Majesty, by and with the advice and consent 
of the lords, spiritual and temporal, and Commons, in this present 
Parliament assembled and by the authority of the same, as follows: 

1. The said twenty-seventh section of the said recited act shall be, 
and the same is hereby, repealed from and after the 30th day of June, 
1857. 


94 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


Analysis of the Vote. 

It will be seen from a study of these debates in Parliament that, 
while there was an overwhelming sentiment in favor of the abolition 
of deductions, the bill which effected it was not passed without en¬ 
countering the intelligent opposition of some of the most thoughtful 
men in the House of Commons. These included not only the mem¬ 
bers of the Government, but such a distinguished member of the 
Opposition as Mr. Gladstone. Without understanding the techni¬ 
calities of the superannuation problem any better, in all probability, 
than did those in favor of the bill, they yet took cognizance of the 
existence of such technicalities and seemed to feel that it would be 
only sensible and prudent to await the verdict of the men supposed 
to understand those technicalities who had been appointed to inves¬ 
tigate them before taking action in the matter. They realized that 
the subject of superannuation bears a close and inseparable rela¬ 
tionship to that of salaries and suspected that a just reform in one 
field could only be achieved through reform in the other. Although 
urged to remember that the commissioners of 1857 had recommended 
the abolition of deductions, “ without any corresponding reduction 
in the salaries,” they were also not disposed to forget that the par¬ 
liamentary committee of 1856 had recommended a revision of salaries 
as the condition on which the deductions should be abolished. Inas¬ 
much as the British public paid the salaries of its civil servants, they 
saw the importance to the public, as well as to the service, of consid¬ 
ering the whole subject thoroughly before enacting any legislation 
supposed to be remedial. 

Those who supported the bill were actuated by motives which 
were more of a credit to their hearts than to their heads. They saw 
the “anomalies and inequalities” of the existing law and hoped that 
by abolishing the system of deductions they could wipe out such 
objectionable conditions. They realized that such a course might 
be expensive for the State, but argued that the State, as a model 
employer, should not hesitate to do right by its employees merely 
because that action was expensive. The keynote of Lord Naas’s 
argument was the cry that the civil servants labored under “an 
oppressive grievance” which, taken together with Mr. Berkeley’s 
statement that “nine out of every ten men in cities were in favor of 
the noble lord’s bill,” showed that the people of the country sup¬ 
ported the bill because they believed that in so doing they were 
rendering an act of justice. Undoubtedly this high tone appealed 
to many members of Parliament who failed completely to see that 
the problem was a technical one and was not to be solved by good 
intentions and generous resolutions. Then, too, many were weary of 
the agitation, and therefore inclined to think, like Mr. Disraeli, that 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 95 

it would be well to abolish the system of deductions, since they hoped 
by such action “virtually to settle this important question.” How 
little this hope has been realized is shown by the fact that the dis¬ 
content of the civil employees with the superannuation system has 
persisted down to the present year and has only recently been 
appeased by the passage of a law making such radical modifications 
in the system as to change the character of it completely from a 
so-called free pension system to a scheme virtually a contributory 
plan. Parliament’s generous action in 1859 failed to “settle this 
important question” simply because the solution offered was unsound 
and unscientific and ignored certain fixed principles of human nature, 
as will be shown in subsequent chapters. 

SUPERANNUATION ACT OF 1859. 

Bill Embodied Minor Recommendations of Superannuation 

Commission. 

A bill to embody the minor recommendations of the Superannuation 
Commission was introduced into Parliament late in the session of 1858 
but was not pressed. A similar bill was accordingly introduced on 
February 7, 1859, by Mr. Benjamin Disraeli, then Chancellor of the 
Exchequer. In moving for leave to bring in the bill, the Chancellor 
said that the principal heads of difference between the proposed bill 
and the existing law were with regard to the duration of services and 
the time of superannuation. It was intended that superannuation 
should commence at the termination of ten years, and that the full 
superannuation allowance should be granted at the end of forty 
years’ service. Under this bill every person in the civil service, of the 
age of sixty, would be permitted to receive his full superannuation, 
and at sixty-five retirement from the public service would be com¬ 
pulsory. The most important provisions of the bill, he said, were 
those which regulated the new scale of superannuation. One of the 
greatest defects of the existing system was that superannuation was 
fixed at the end of a septennial term of service and hence the same 
benefits were often enjoyed by persons who had really served very 
different terms. These defects were remedied by the proposed bill, 
superannuation being calculated by the yearly services of the public 
servants. The bill contained provisions regulating the superannua¬ 
tion to which professional men who entered the public service com¬ 
paratively late in life should be entitled. It also provided for the 
abolition of offices and other matters of an analogous character, which 
hitherto had not been satisfactorily settled; or if so, were arranged 
rather by the discretion of the Treasury than by the sanction of the 
law. 


96 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


At the conclusion of the Chancellor’s remarks, Mr. Wilson said he 
did not rise to oppose the introduction of the bill, but he wished to 
remind the House that when Lord Naas had brought in a bill for the 
abolition of deductions two years before, he (Mr. Wilson) had called 
attention to one of the consequences which would follow from it— 
that its effects would be to do away with all distinctions between the 
public servants in regard to superannuation. Under the Act of 1834, 
no persons in the civil service had any legal claim to superannuation 
allowances, except they had submitted to the abatements provided 
for under that act, but if the enactment creating abatements was 
repealed, allowances could not be denied to any person in the public 
service. Having, however, been induced to take that step, Mr. Wilson 
held that it now only remained for the House “to do justice, and to 
allow the superannuation allowance to bear the same proportion to the 
salary, whether great or small, of every man in the public service.” 

Mr. Rich, who had made a strong speech two years before, in oppo¬ 
sition to the bill abolishing the abatement system, allowed himself 
the satisfaction, on this occasion, of saying politely: “I told you so.” 
He reminded the House that when the bill of Lord Naas was debated, 
it had been said that this was not merely a question of abatement, but 
that the House would be “pestered” by every public servant for a 
pension. He said that they saw the beginning of that state of things 
now, for every public servant was claiming superannuation. He 
would throw out, for the consideration of the Chancellor of the 
Exchequer, that superannuation allowances represented a capital of 
£3,000,000 ($14,599,500). As the Government were changing their 
opinions on other points perhaps they would reinstate the abatement 
clause, which would furnish them with an answer to everyone asking 
for a pension. 

On the motion for the second reading of the bill, Sir H. Willoughby, 
who had previously declared himself to be “one of those who took 
a fearful view of the increasing charge for superannuation allow¬ 
ances,” declared his belief that the bill “would throw an enormous 
burden upon the country.” He said that: 

The Government ought to inform the House what that superan¬ 
nuation would cost the country. In the shape of compensation and 
superannuation the country was at this moment paying £1,400,000 
($6,813,100), and if the whole civil service of the country was to be 
entitled to superannuation he would ask where was it to end ? Al¬ 
though the tax, which amounted to £70,000 ($340,655), had been 
abolished, there was nevertheless a new scale and state of things 
established. He objected to the form of the bill, and to that bit-by- 
bit legislation it proposed, for in dealing with the question of super¬ 
annuation they ought to deal with it as a whole.( a ) 

^Hansard’s Parliamentary Debates. 3rd series. Vol. CLII, p. 592. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 97 

Bill Introduced and Defended by the Government. 

Sir Stafford Northcote, then Secretary for the Treasury, next 
defended the bill as a Government measure, saying that it was “the 
wish of the Government that the bill should accomplish that which 
it was principally intended to accomplish, namely, the putting all 
classes of the civil service on one uniform footing, as well as putting 
an end to these anomalies that had at present, and for a long time, 
existed in the system of superannuation.” He also reminded the 
House very justly that, with regard to the additional expense which 
this bill would throw upon the country by taking off abatements, 
the Government had to consider not what were the recommendations 
of the select committee or the royal commission, but what was the 
act>of that House. He said that: 

This question should not be looked upon as a mere question of 
pounds, shillings, and pence, as the honorable Baronet had put it. 
For what was the object of the superannuation system? Its object 
was to get good men for the civil service at moderate prices, to keep 
them as long as their services were valuable to the country, and to 
provide for their retirement when their services were not sufficiently 
valuable to the country. If that system were to be continued it 
must be clear, intelligible, and uniform, because if you had a system 
by which people, when appointed were uncertain as to whether they 
would receive superannuation, you could not, on the one hand, 
when you engaged them, get the benefit of the system by engaging 
them at moderate salaries, nor could you, on the other, from consid¬ 
erations of humanity, dispense with their services just at the time 
when they began to be of less value to the country than when they 
were engaged. The last great settlement of the superannuation 
question was in 1834, but in that settlement there were several 
blemishes. One was that the superannuation was confined to a 
certain number of offices named in a schedule to the act. A great 
number of offices, however, had grown up since the Act of 1834, 
which did not come within the scope of its provisions. The persons 
holding those offices were not subject to abatements, but they got 
pensions, though on a very irregular and unsatisfactory system. For 
instance, the officers of the Poor-Law Board, and some others, were 
paid off, not on any established system, but in an irregular manner. 
One of the objects of this bill was to put an end to the scheduling of 
offices, and to make the superannuation apply to the whole civil 
service. With regard to the additional expense consequent upon 
introducing all those other classes of persons, he thought the honorable 
Baronet formed an exaggerated opinion of it. Although it was 
perfectly true there was a large number of persons interested in the 
passing of this bill, it was to a great extent because they desired 
certainty and something like a fixed system that they were so inter¬ 
ested. The great class who would probably be brought within the 
superannuation provision, in addition to those who were now included, 
would be persons employed in country Post-Offices. He could not at 
That moment give an exact estimate of the number of that class of 

35885—S. Doc. 290, 61-2-7* 


98 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


persons; but the Postmaster General and the authorities in the Post 
Office had represented that the department suffered seriously by not 
having a proper system of superannuation and retirement, and by not 
being able to get rid of persons who were past service. The measure, 
therefore, if the House looked at it in a broad light, was one for the 
improvement of the civil service generally, and he believed it to be 
one of true economy. It was one of a series of measures which the 
present and the late Government had been taking for some time past 
for improving generally, and so economizing the civil service. ( a ) 

On March 18 Sir Stafford Northcote moved that the House resolve 
itself into a committee on the bill, and in making the motion con¬ 
tinued his defense of the bill. In this speech he laid emphasis on the 
desire of the Government to treat all members of the civil service 
uniformly and equitably, something that had never been accom¬ 
plished under the Act of 1834. He said the bill would apply only to 
persons who were permanently employed in the service in such 
capacities as rendered it necessary for them to give up all other busi¬ 
ness and devote themselves wholly to the service of the State, thus 
excluding country postmasters who were also the keepers of shops. 
Another condition necessary to entitle persons to such allowances 
was that they should be paid out of Imperial funds; and therefore 
all persons paid out of county rates—such as prison, workhouse, and 
other poor law officers—would be excluded from the benefit of the 
act. Neither would the bill apply to persons who were paid by fees. 
Such persons were not entitled to superannuation, because the prin¬ 
ciple upon which that system rested was that in fixing a man’s remun¬ 
eration how much he ought to have by way of salary was considered 
and how much by way of retiring allowance; and the difficulty with 
regard to persons paid by fees was that, although they were employed 
in the service of the State and were to a considerable extent under its 
control, they generally held their offices partly at the will of other 
persons and might be dismissed by them. 

Discussing the important subject as to what increase of expense 
would be caused by the provisions of this bill Sir Stafford lamented 
that ‘That must be so much a matter of conjecture that he felt it 
quite impossible to make any satisfactory statement with regard to 
it.” He said that there were three ways in which the expense of 
superannuations would be affected by the passing of the bill. In the 
first place there was the adoption of the new scale. The existing 
scale was what was called a “jumping” one; it went by periods of 
seven years. That provided by the proposed bill was a “sliding” 
scale, advancing year by year by sixtieths. It stopped at the same 
maximum as the existing scale, namely two-thirds, or forty-sixtieths 
of the salary; but under it a man would arrive somewhat earlier at 
his maximum allowance than he did at present. The scale was, 

a Hansard’s Parliamentary Debates, CLII, pp. 592-595. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 99 

however, so arranged that while it gave an advantage to those who 
had served long periods, it diminished the allowances of those who 
had been engaged in the service of the State for shorter ones. In 
order, therefore, to determine how much the expense of superannua¬ 
tions would be increased by the bill, it was necessary to calculate after 
what periods of service civil servants were likely to retire. Another 
way in which the bill might add to the expense of superannuation, 
Sir Stafford said, was by bringing new classes of officers under the 
provisions of the act. There again, however, he found it exceed¬ 
ingly difficult to come to any kind of conclusion. Upon being asked 
what classes and what number of officers would be brought under the 
bill, the different departments replied by inquiring to what classes 
the bill was intended to apply, and a difficulty arose as to who were 
and who were not to be included under the term “permanent civil 
servants of the State.” A third way in which the bill would to some 
small extent add to the expense, Sir Stafford said, was by adding to 
the number of civil servants entitled to superannuation. One of the 
clauses gave permission to officers to retire at the age of 60, and 
another made it compulsory so to retire at the age of 65, unless they 
were specially asked to stay as being efficient servants. Upon inquir¬ 
ing at the different departments what number of officers would be 
required to resign on account of age he was met by the same kind of 
counterquestion instead of answer—namely, what classes of persons 
were intended to come under the provisions of the bill. The result 
of all their inquiries had convinced the Government of the necessity 
of limiting the operation of the bill and of laying down some more 
stringent rule than was afforded by the words “permanent civil serv¬ 
ice of the state.” He therefore intended to move the insertion of a 
clause, stating who were to be deemed civil servants. No person 
was to be deemed a civil servant unless he either held his appoint¬ 
ment directly from the Crown or was admitted with a certificate from 
the Civil Service Commissioners. He said that: 

The question of obtaining a certificate from the commissioners 
was distinct from, though connected in some degree with, that of 
open competition, because the system was applicable to all kinds of 
admissions, and included not only literary, out what were equally 
important, medical examinations. He believed, for his own part, 
that by adopting a system which seemed calculated not only to 
procure able and efficient officers, but to ensure them fair and 
equitable treatment, the House would do much to allay the present 
uncomfortable and excited state of the civil servants and to perma¬ 
nently improve the condition of the civil service itself; and although 
his statement with respect to the possible expense of the proposed scale 
of superannuation might appear unsatisfactory to some honorable 
members, he would entreat the House to look at this subject in a 
broader point of view. What the country really wanted was not to 
save so many pounds, shillings, and pence in the superannuation of 


100 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

its civil servants, but an adequate supply of good, cheerful, and 
willing servants, and the adoption of measures which would enable 
those in its employment to retire at the proper time without a feeling 
of hardship. ( a ) 

Debate on the Bill. 

As soon as Sir Stafford had taken his seat, Sir Henry Willoughby 
renewed his previously expressed objection to the bill, “an objection 
grounded upon the total ignorance in which the House was as to the 
increase of expense the bill would cause .’ 1 He said that— 

This speech of the honorable baronet, clear as it was in other 
respects, was rather obscure as to the question of what would be the 
additional expense that would fall on the public by the passing of 
this bill, and this was a very serious question. The amount paid 
already yearly for pensions and superannuations was enormous—it 
amounted to a million and a half. As an approximation toward 
it, he would take the civil-service salaries at £5,339,000 ($25,982,243), 
and he inferred that the charge with regard to that sum imposed by 
the bill would be £1,122,000 ($5,460,213) for superannuations. Add 
to that the £74,000 ($360,121) lost by abolishing the deductions from 
the salaries and the compensations consequent on the abolition of 
the ecclesiastical courts, and other compensations amounting toward 
£1,500,000 ($7,299,750). The select committee wdio sat on this 
question had recommended the repeal of such portions of existing 
acts as provided for reductions from the salaries of the civil servants 
to form the superannuation fund, but they also recommended a revi¬ 
sion of the salaries. The point he desired to impress on the House 
was this: Let the civil servants have the benefit of it, but let the 
House not increase the scale of superannuation. His object was to 
do justice to the civil service and certainly at the same time to the 
taxpayers. He said, therefore, by all means give them the advantage 
of a repeal of the tax, but adhere to the scale of 1834. He did not 
mean to argue for the infallibility of that scale, and if the jump 
every seven years were unwise, let it be altered. Let them not, 
however, increase the scale of superannuation. ( b ) 

Mr. Gladstone next took up the debate, saying that he did not 
propose to enter at any length into a discussion of the bill, but he 
thought that his honorable friend, the Secretary for the Treasury, had 
made a large demand on the House when, as financial secretary, he 
exhorted them to take a broad view in this matter, and to enact a 
system of pensions on a new basis, without knowing what classes 
were to be included within the provisions of the measure, and with¬ 
out being aware of the extent of the burden about to be added to 
the already heavy burdens on the public finances. He further 
warned his hearers that this was a subject upon which it was emi¬ 
nently necessary the House should have full knowledge of that which 
they were about to do, because they were not enacting to-day that 
which would take effect to-morrow, and of which to-morrow would 


« Hansard’s Parliamentary Debates, Vol. CLIII, p. 360. 
b Idem, pp. 362-363. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


101 


give experience for correction the day after. They were enacting 
now that which would not take full effect for the next forty or fifty 
years, and they were now entering into a new set of engagements, 
every one of which, even if it reached over half a century or more, 
must be kept absolutely sacred, however onerous might be the con¬ 
sequences. Mr. Gladstone next protested that the passage of the 
bill abolishing deductions had been accomplished on the understand¬ 
ing that salaries were later to be reduced correspondingly, but 
instead of doing that the Government was now proposing to still 
further augment salaries “entirely irrespective of the particular 
merits, duties, or features of the different cases.” He said that— 

When this question was examined and it was first decided by a 
committee of that House that it was desirable to remit the deductions 
which had been levied under act of Parliament from the salaries of 
the civil servants, the committee recommended that the salaries 
of civil servants should undergo a revision generally corresponding 
to the deductions, and only a few years previously the House had 
been almost upon the point of adopting a vote for a general diminu¬ 
tion of the salaries of civil servants, entirely irrespective of any 
relief they were to receive by a revision of these deductions, but the 
deductions having been remitted the revision of salaries appeared to 
have been forgotten. He did not make any charge against anyone, 
and he was perhaps wrong in saying it had been forgotten, for he 
hoped it was still intended to carry that process into effect. But it 
might be said that the civil servants were very insufficiently and 
illiberally paid. But his honorable friend had said that at this very 
hour, when the House was determining to remit these deductions, 
the Civil Service Commission were showing by the result of their 
examinations that the system of admission to the civil service had 
been extremely lax, and that no inconsiderable number of persons 
had been allowed to hold offices and to receive salaries for the dis¬ 
charge of duties to which they were incompetent. Upon that 
ground, therefore, as well as upon others, he submitted that there 
was no case of injustice on the part of the civil service as a body. It 
could not be alleged, with the slightest color of truth, that that service 
as a body was underpaid. Everything that the public had con¬ 
tracted to do for them had been rigorously and faithfully performed, 
and he asked, therefore, whether it was just to the people of England 
that wholesale, without the slightest respect either to the merits of 
individuals or classes, or to the relations between the salary and the 
duty to be discharged, the House should proceed to remit the form 
of deductions and to add in that manner to the public burdens, 
while at the same time it entirely ignored the corresponding recom¬ 
mendation of its committee that with reference to this deduction a 
revision of the salaries should take place ? He hoped to hear from 
the Government, first, some declaration as to the manner in which it 
was intended to proceed with regard to the classes of persons who 
ought to be included within the provisions of the act; secondly, some 

E romise that before the bill was read a third time an estimate should 
e framed of the addition which was likely to accrue to the public 
expenditure; and, thirdly, a statement whether it was intended that 
the remission of the reduction should be followed by a reconsideration 


102 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

of the rates of salary, or whether, on the other hand, it was meant 
that that remission of deductions should stand as a simple, sweeping, 
wholesale augmentation of the salaries of the civil service, entirely 
irrespective of the particular merits, duties, or features of the differ¬ 
ent cases. ( a ) 

Mr. Wilson then told the House that, two years before, when it had 
been his duty to bring to the consideration of the House an estimate 
of what the results of a fair superannuation measure would be, he 
had stated that the ultimate additional cost that would be entailed 
upon the country by the proposed measure would be about £100,000 
($486,650) for the remission of abatements, and another £100,000 
for the creation of additional pensions. He did not understand that 
the present bill proposed any additional scale for superannuation. 
The result of the bill would be merely to give effect to the practice 
which had prevailed, in awarding pensions under former acts, of 
apportioning the pensions to the exact number of years of service. 
His advice to the House was to settle the question “upon a broad 
principle, which everyone could understand, and which would be 
just to all.” He believed that the best way to promote content 
would be to establish uniformity, and he did not believe that the 
operation of the bill would add more than 12 or 13 per cent on 
that which was now paid, or increase the charge more than £100,000 
($486,650). 

Sir Francis Baring said that he had opposed the motion of Lord 
Naas for getting rid of the old system of making deductions from 
the salaries of public servants, and he did his best to persuade the 
House that it would be unwise and most expensive to adopt that 
step. The House, however, contrary to the opinion of the Govern¬ 
ment of the day and the committee, was pleased to get rid of the 
system. The only question, then, was how much they had to pay. 
By the old scale a discretion was allowed to the Treasury within 
certain limits to give the good servants a larger, and the indifferent 
servant a smaller superannuation. By the present system that dis¬ 
cretion was a good deal removed, and upon the whole he preferred 
the new plan to the old. He entreated the House most earnestly 
to settle the question, saying that whatever it did, it could not do 
worse than leave the matter unsettled. It had only two courses 
open to it, either to revert to the old system or go on. It could not 
revert to the old system, and so its only course was to go on “even 
though it might have to pay somewhat dearly for its whistle.” 

Sir George Lewis said he was ready to accept the consequences of 
the decision that the abatements should be abolished, and that the 
distinction which the payment of those abatements previously made 
between the class of public servants entitled to superannuation al¬ 
lowances by reason of their being subject to such abatements and the 


a Hansard’s Parliamentary Debates, Vol. CLIII, pp. 366-367. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 103 

class of officers not entitled to superannuation allowances by reason 
of not being subject to such deductions should be done away with. 
But he was not prepared to go beyond that principle. He could see 
no reason for an increase in the scale of superannuations. 

The Chancellor of the Exchequer closed the debate. He contended 
that the increase in cost of superannuations under the bill would be 
slight and due to no increase in salaries but to the fact that the scale 
had been framed to obtained the annual progression which was 
considered desirable. He said that in urging the bill the Govern¬ 
ment had established a principle which would guide it in the man¬ 
agement of all cases, namely, that those who received the privilege 
of superannuation shall pass under the examination of the Civil Serv¬ 
ice Commission. lie then answered Mr. Gladstone as follows: 

The right honorable member for the University of Oxford (Mr. 
Gladstone) has said that before this discussion terminates he expects 
from the Government information on three points—first, the class of 
persons whom we propose to bring under this act; secondly, whether 
we intend to revise the public salaries; and thirdly, he wishes to have 
an estimate of what will be the increase of charge if this bill passes. 
With regard to the first point—the class of persons who will come 
under this act—I will say at once that all those who are included in 
the original schedule of the existing act, all added since, such as Poor 
Law Commissioners and others, and all those who have become 
entitled to be added, will come under the provisions of this act, also 
those classes mentioned in this debate—namely, those employed in 
the dockyards and the Post-Office. As to the second point, whether 
it is the intention of Government to institute a revision of the salaries, 
I would beg to refer to the opinion given on that subject by the royal 
commissioners. The royal commissioners were of opinion that such 
revision would be impracticable, and they gave their reason for their 
conclusions. Our opinion agrees with that of the royal commissioners, 
and we do not think that it is expedient, taking a general view of all 
the circumstances connected with the question, that a general revision 
of the salaries should take place. I need hardly touch upon the third 
point, the increase of the amount of charge if the bill passes—because 
the honorable member for Devonport (Mr. Wilson) has given his 
opinion to the House, an opinion founded on experience, and entitled 
to be regarded as of authority on this point. I would say that I 
believe the estimate of the honorable gentlemen is well founded; but 
I believe the expenditure would be rather under that figure than not. 
And if that is the case, can the House hesitate to pass a bill of this 
kind, which I think is founded on principles of policy and justice, 
which has been recommended, and fairly recommended, by the 
public, and which after a long discussion appears to receive the 
approbation of the House. (°) 

On the third reading of the bill, there was no debate, but Sir Henry 
Willoughby asked the Government for an estimate of the expense 
which its provisions would entail on the country. 


“Hansard’s Parliamentary Debates, Vol. CLIII, pp. 374-375. 



104 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

Sir Stafford Northcote stated in reply that the increase of expendi¬ 
ture consequent upon the passing of the bill might possibly be 
£70,000 ($340,655) a year at the utmost, taking into account the 
additions to be made by taking in a new class of officers, and the 
possible effect of an alteration in the scale. 

Sir Denham Norreys thereupon said he considered this was one of 
the most improper and uncalled-for bills the House had ever passed. 
It was founded on a promise of a revision of salaries, but that revision 
had never been and probably never would be carried out; and yet 
the bill would inflict a burden of £70,000 ($340,655) upon the 
country. 

Mr. Drummond also said the bill was a most improper one, both in 
principle and detail. If it were just in principle, which he denied, 
every banker and merchant ought to provide superannuation allow¬ 
ances for his clerks and every private person for his servants. 

Mr. Weguelin said that, as one of the commissioners who had 
originally investigated this subject, he was desirous of expressing his 
belief that the bill contained the only practical conclusion that could 
be come to upon it. The revision of salaries referred to could only be 
prospective, as it was almost impossible to reduce the salaries of 
existing officers. The bill might throw an additional charge upon the 
revenue for the present, but ultimately it would result in a saving to 
the country. 

The bill was then read for the third time in the House of Commons 
and passed. Unfortunately, the most valuable recommendation of 
the Superannuation Commissioners, the recommendation to render 
retirement compulsory at the age of sixty-five, did not meet with the 
approval of the House and that provision was expunged from the 
act in committee. Undoubtedly the effort of the Government to 
obtain uniformity in the treatment of all civil servants was praise¬ 
worthy, and to that extent the Act of 1859 was an improvement over 
the Act of 1834. 

Main Features of the Act. 

The chief recommendations of the Civil-Service Superannuation 
Commission of 1857 were accordingly embodied in the superannua¬ 
tion act which became a law April 19, 1859. The act practically 
repealed the Act of 1834, only two provisions of that law being opera¬ 
tive since then. Those are Section XII, which regulates the salary 
upon which a pension is to be calculated as the average for three years 
preceding retirement, and Section XX, which provides that the total 
receipts for pension and salary combined of an employee recalled 
to the service after retirement shall not exceed the amount of his 
former salary. ( a ) 


° See Sections XII and XX, Act of 1834. Appendix I. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 105 

Under the Act of 1859 it became necessary in order to qualify 
for a pension— 

(1) That a civil servant should have been admitted to the service 
with a certificate, unless appointed directly by the Crown or placed 
under the professional section of the act. 

(2) That he should have given his whole time to the public service. 

(3) That he should draw the emoluments of his office from public 
funds exclusively. 

(4) That he should be certified to have served with diligence and 
fidelity to the head of his department, else the full amount of pension 
may not be awarded. 

(5) That he should have served for not less than ten years, unless 
in the case of abolition of office. 

(6) That if under the age of 60 he should be certified to be per¬ 
manently incapable, from infirmity of body or mind, of discharging 
his official duties, or his place must have been abolished. 

On qualification for retirement under the six general conditions 
explained above a civil servant became entitled to a pension calcu¬ 
lated at one-sixtieth of his retiring salary for each year of service, 
subject to a maximum of forty-sixtieths. The pension was calcu¬ 
lated upon the average of his emoluments during the last three years. 

A free and universal pension for all members of the permanent 
civil service having been inaugurated by the Act of 1859, it would 
seem that all those who had the good fortune to be among those 
thus “established” might have been satisfied. Such, however, was 
not the case. Mutterings of discontent soon began to be heard. 
On the one hand were heard the criticisms of the public generally 
as to the growing cost of the system, and on the other hand the 
complaint of the beneficiaries that the system made no provision 
for the dependents of civil servants and that various bodies of 
employees not classified as members of the permanent service were 
excluded from the benefits of the act. 

SELECT COMMITTEE OF 1873. 

In 1873 a select committee was appointed by Parliament to inquire 
whether any reductions could be effected in the expenditure for civil 
services. The system of pensions or superannuation received some 
attention from this committee. The witnesses examined, who were 
high officials of State, testified without exception to the public 
value of a superannuation system as increasing both efficiency 
and economy in the service. The opinion of any two or three 
of them may be taken as representative of all. Sir Thomas Fre¬ 
mantle, who was chairman of the Board of Customs at the time, and 


106 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

who had previously been Secretary for Ireland, Secretary at War, and 
twice Secretary to the Treasury, so that he had had a very large offi¬ 
cial experience for many years, was asked if he was satisfied that 
every member of the civil service should be pensioned. 

“Indeed I am,” he answered, “I should be very sorry to interfere 
with the scheme of superannuation. 

“For the work of the establishments?” queried the chairman. 

“For those who are on the permanent establishment.” 

“You do not think that the country would get as good service 
unless that prospect of pension was held?” 

“I think not, and in one respect the country would get very much 
worse service, because in the case of an officer who is nearly worn 
out and unable to do his work in a satisfactory manner, it is really 
essential for the transaction of the business of the establishment that 
that man should be removed; and if we are able to say ‘you are 
entitled to superannuation/ we can put pressure upon him and get 
rid of him, but if he had no superannuation it would be practically 
impossible to remove a man.”( a ) 

Value to the Public Service of a Superannuation System. 

Sir William Henry Stephenson, chairman of the Board of Inland 
Revenue, who had formerly been for many years in the Treasury and 
had had great experience in the organization of the public service 
generally, and of inland revenue service in particular, said: 

“I think there is a great advantage in superannuation as regards 
permanent officers; it is a great hold upon them. 

“Even down to messengers and persons who are engaged on weekly 
wages?” asked the chairman. 

“Yes, I think it is quite as important with them. It is an immense 
power that you have over a man’s disposition to behave himself 
well.”( b ) 

The Chancellor of the Exchequer declared himself with especial 
emphasis in favor of the pension. 

“I think that superannuation is a very good institution indeed,” 
said he. “We get men young; we teach them their business; we 
shall get them I think with a fair prospect of having men of good 
intelligence; and by practicing their business, they learn it until they 
become very valuable, and worth indeed a great deal more than the 
salaries in the public service, which are not very high. By superan¬ 
nuation we contrive to retain them in the service, whereas, if we 
had not superannuation, we should always have to be teaching and 
bringing up persons who would be going off and carrying their attain¬ 
ments to a higher market. I think that superannuation is a very 
good institution, and an economical one.”( c ) 

a Third Report on Civil Services Expenditure. 1873. Minutes of evidence, p. 203. 

& Idem, p. 209. 

cldem, p. 230. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 107 

Compulsory Retirement at a Given Age Advisable. 

While agreeing that a superannuation system was desirable, the 
witnesses were not by any means convinced that the scheme estab¬ 
lished by the Act of 1859 was beyond criticism. One weakness of 
the system was felt by all. This was the failure of the law to make 
retirement compulsory at some given age. Mr. Robert G. W. Her¬ 
bert, the permanent Under Secretary of the Colonial Office who had 
previously been with the Board of Trade and with the Railway De¬ 
partment and had therefore had a variety of experience of official 
and departmental organization, was asked if he did not observe a 
tendency of persons to hang onto their offices long after they had 
become inefficient. 

“Yes,” said he, “there is that tendency. There is no legal means 
of requiring a man to leave. The English superannuation act does 
not exact that at a certain age a person shall retire; it is merely by 
what I suppose I may call a friendly arrangement that he goes when¬ 
ever it is found necessary for him to go. I think the superannua¬ 
tion act ought to contain a proviso that at a certain age, either 60 
or whatever other age might be thought expedient, a clerk should be 
compelled to leave the service, unless he were asked to remain for a 
particular time, say two or three years longer, by the head of his 
department, on special grounds, I think that retirement should, as a 
general rule, be compulsory at a certain age.”( a ) 

Asked if he would wish to have the power of compulsory superan¬ 
nuation, Sir William H. Stephenson said, 

I should be very glad to see it, and I think it would be a very use¬ 
ful power both to the public and very often to the individual him¬ 
self. * * * I have seen many instances in my own knowledge, 

both recently and in former times, of men far overstaying their 
energies. ( * 6 ) 

Mr. Reginald Earle Welby, principal clerk for financial business of 
the Treasury, was asked if he did not think that, in the interests of 
economy, superannuation might be withheld from certain classes of 
civil employees, and answered :( c ) 

“I am always afraid of sweeping away the right to pension, be¬ 
cause I feel convinced that it will mean keeping men in the service 
after they have ceased to be efficient; I feel that so strongly that I 
think, if I may venture to say so, that retirement throughout the 
service ought to be compulsory at the age of sixty-five. 

“It is compulsory as against the Government at the age of sixty, 
is it not ? asked the chairman. 

“Yes, but there is no limit as against the officeholder. 

“ There is no reciprocity, is there ? 

“There is no reciprocity.” 


a Third Report on Civil Service Expenditure. 1873. Minutes of evidence, p. 166. 

6 Idem, p. 209. 
cldem, p. 7. 



108 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


Cost of Maintaining Free Pension System. 

The question of expense in connection with the maintenance of 
civil pensions was recognized to be of first importance. Mr. Welby 
handed in the following estimate of the sum required for the current 
year (1873-74) to pay salaries and superannuation to all civil serv¬ 
ants. This included not merely those employed in the civil service 
proper but also civilian employees of the Army, Navy, Judiciary, and 
Revenue departments, and showed that the total charge for “non- 
effective civil services” was estimated to be £1,829,931 ($8,905,359.21). 
Noting this fact, the chairman of the committee asked Mr.. Welby 
if that expenditure was tending to diminish or to increase. 

“The superannuation proper is tending to increase in one direc¬ 
tion and to decrease in another,” said he, “It increases, of course, as 
fresh departments are formed as part of the civil service; it has a 
tendency to decrease as the number of established officers entitled to 
pension is diminished. For instance, if a department which had 
had fifty clerks on the establishment is reduced to thirty clerks on 
the establishment, the tendency of course will be a diminution of 
the pension list; in addition to that we are still under the effect of 
the superannuation regulations before 1829, which were on a much 
more liberal scale than those which are now accorded to the civil 
service, but the pensions granted previous to 1829 are of course fall¬ 
ing off rapidly now, and the pensions now granted are upon the lower 
scale, therefore there are those three different influences at work.”(°) 

The estimate furnished by Mr. Welby was as follows: ( 6 ) 


ESTIMATE (APPROXIMATE) OF THE AMOUNT TO BE PAID IN SALARIES AND ALLOW¬ 
ANCES IN RESPECT OF EFFECTIVE AND NONEFFECTIVE CIVIL SERVICES OF THE 
ARMY, NAVY, CIVIL, AND REVENUE DEPARTMENTS DURING 1873-4. 

[Only those salaries are included which will carry with them a claim to pension.] 


Army: 

Effective c. 

Noneffective. 

Navy: 

Effective. 

Noneflfective. 

Civil service: 

Effective. 

Noneffective. 

Criminal and judicial: 
Law and justice— 

Effective. 

None fleet: ve.. 
Police- 

Effective. 

Noneffective.. 
Collection of revenue: 

Effective c . 

Noneffective. 

Total: 

Effective. 

Noneffective.. 


Charged on votes. 


Ordinary 

services. 


, 233,521 
834, 507 

883, 419 
423,919 

082, 629 
209, 939 


, 136,912 
, 033, 601 

, 913,673 
737,946 

, 792,325 
, 348,772 


35,042, 479 
7,588, 684 


Political 

services. 


$46,232 


31,632 
277,025 


55,838 


410,727 


Total. 


*1,279,753 
834,507 

3,915,051 
1, 423,919 

6, 359, 654 
1,209,939 


5,192,750 
1,033, 601 

3,913, 673 
737,946 

14,792,325 
2,348,772 


35,453,206 
7, 588,684 


Charged on Consolidated Fund. 


Ordinary 

services. 


$50,952 
91,081 


2, 458, 444 
1,055, 870 


2, 509, 396 
1,146, 951 


Political 

services. 


$10,706 

97,330 
d 159,018 


97,330 
169,724 


Total. 


$10,706 

148,282 
d 250,099 


2, 458, 444 
1,055, 870 


2,606,726 
1,316, 675 


Total. 


$1,279,753 
834,507 

3, 915,051 
1, 434,625 

6, 507,936 
d 1, 460,038 


7, 651,194 
2,089, 471 

3,913,673 
737,946 

14,792,325 
2,348,772 


38, 059,932 
8,905,359 


a Third Report on Civil Service Expenditure. 1873. Minutes of evidence, p. 7. 

5 Idem, Appendix No. 10, p. 406. 

c In the military and postal departments a large amount is paid in salaries, the recipients of which will 
not, in all cases, receive superannuation. As each case will be decided by itself on no general rule, they 
have not been included in this return. 
d Includes £11,380 ($55,381) hereditary pensions. 























































CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 109 

Pension Charge Reduced by Reducing Number of Pensionable 

Clerks. 

A very interesting fact in connection with the efforts made by the 
Treasury to reduce the cost of superannuation was brought out by 
Mr. Welby’s testimony. This was the policy of the Treasury to 
substitute as far as possible those persons outside the permanent 
civil service for permanent officers entitled to superannuation. 
The result was a small number of classes of established clerks and a 
considerable number of subordinates. Mr. Welby was asked: 

Is it your opinion that the tendency which you have explained at 
the Treasury to substitute nonestablished for established employees 
will ultimately produce a considerable reduction in the charge for 
superannuation ? (°) 

To this he answered: 

I should think so; I will take, as an instance, the result of the 
enquiries during a period of years into the Customs; I think the 
result of that has been to reduce something like 650 established 
clerks to a little over 400, and, of course, the future charge for super¬ 
annuation will be reduced in that proportion. ( a ) 

This avowed policy of the Treasury threw into bold relief the most 
obvious objection to a straight pension; that is, the great expense 
and the difficulty of keeping a civil pension list within bounds. 
The method resorted to by the Treasury may have been effective, 
but the question naturally arises, Did it not result in the defeat of 
the system and the revival of that invidious distinction between 
different classes of employees complained of at the time of the pas¬ 
sage of the Superannuation Act of 1859? 

Development of Idea that Pension is a Substitute for Salary. 

Through all these hearings before the Select Committee of 1873 
runs an idea destined in later years to develop into more definiteness. 
This is the idea that superannuation allowances are a substitute for 
greater salaries. It was generally held that from the Government’s 
point of view it is wiser to grant pensions and give less pay than to 
pay higher salaries and give no pensions. 

Mr. Thomas Henry Farrer, permanent head of the Board of Trade, 
who had been in the public service for twenty-three years, said: 

I used to be of opinion that it would be a better plan to pay higher 
salaries and give no pension; but seeing the extreme difficulty of 
ever getting rid of an old public servant, however useless, without a 
pension, I have changed my opinion, and I think that there must be 
pensions for the upper part of the establishment. ( b ) 

a Third Report on Civil Service Expenditure. 1873. Minutes of evidence, p. 7. 
b Idem, p. 190. 



110 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

Sir William H. Stephenson was asked if he did not think that a 
civil servant engaged for a limited period, after which he was to be 
compulsorily retired, with no provision for a superannuation allow¬ 
ance, might not be naturally expected to make arrangements out 
of his salary on his own account. His answer was: 

Yes; but then I fall back upon the question of economy. I think 
that if you introduce that system, you would find yourself drifting 
into a higher payment of salaries. 

Of the same opinion was the Hon. Adolphus Liddell, Under Secre¬ 
tary of State for the Home Department. Said he: 

I am not very good at figures or finance, but it does seem to me, as 
an ordinary being, that if you give a man an extra salary to enable him 
to insure, you do the same thing by giving him that extra salary as 
by giving him a superannuation allowance with a somewhat less 
salary. 

"On the whole, you would rather have things as they are?” he was 
asked. 

I would. I think you would by that means insure a more satisfied 
and more permanent servant. ( a ) 

The gentlemen who appeared before the Select Committee were 
questioned in passing as to their views of a system of deductions 
from salaries as a substitute for the expensive pension system in 
vogue. While most of them showed familiarity with the provisions 
of the Act of 1834, under which the old contributory system of super¬ 
annuation was carried on, and appreciated its avoidable faults and 
the reasons for public discontent under that system, they seemed 
to think that the heartburnings of that period had been such as to 
make it unwise to revive the principle of deductions from salaries as 
a mode of paying pensions and compensations. “The action of 
Parliament in the matter,” said Mr. Welby, * * * “was looked 

upon as closing the chapter.” 

Recommendation of the Committee. 

As a result of these hearings the committee included in its third 
report a recommendation for the compulsory retirement of officers 
at a given age. The paragraph relating to the subject was as follows: 

With respect to superannuation, what your committee have al¬ 
ready stated will indicate the doubt they feel as to the practicability 
of excluding any considerable body of the clerical establishments 
from its benefits. The advantages of the system, as retaining in the 
service trained officers, as protecting the public from combinations, 
and as a means of enforcing discipline, are obvious. On the other 
hand, the aggregate charge on the exchequer for superannuations and 
pensions is increasing; and your committee fear that the extent to 
which it is likely to grow may produce an effect on the public mind 

a Third Report on Civil Service Expenditure. 1873. Minutes of evidence, p. 212. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. HI 

unfavorable to the whole system. Whether, however, it should or it 
should not be thought desirable to limit for the future the numbers 
entitled to the benefits of the superannuation act, your committee 
recommend that powers should be sought from Parliament for com¬ 
pelling the retirement of officers at a given age (say 65), if in the 
opinion of the head of the department such retirement would be for 
the public benefit. (°) 

Great as was the need of fixing compulsory retirement at some 
given age, it was years before the recommendation of the Select 
Committee of 1873 was acted upon. The same recommendation is 
found fifteen years later among the recommendations of the Ridley 
Commission in its second report, printed in 1888, but it was not until 
the issue of the order in council dated November 29, 1898, that re¬ 
tirement from the civil service was made compulsory at the age of 65. 

PLAYFAIR COMMISSION, 1874. 

In 1874, the year following the parliamentary inquiry into civil 
service expenditures just noted, a commission was appointed by 
Treasury minute to inquire into the following subject connected with 
admission to and service in the civil departments of the State: ( h ) 

1. The method of selecting civil servants in the first instance. 

2. The principles upon which men should be transferred from 
office to office, especially in cases when one establishment has been 
abolished or reduced in number, and when there are, consequently, 
redundant employees, whose services should, if possible, be made 
available in other departments. 

3. The possibility of grading the civil service as a whole, so as to 
obviate the inconveniences which result from the difference of pay in 
different departments. 

4. The system under which it is desirable to employ writers or 
other persons for the discharge of duties of less importance than those 
usually assigned to established clerks, or duties of a purely temporary 
character. 

Optional Retirement After Twenty Years’ Service Proposed 
and Rejected. 

The work of this commission resulted in the adoption of a scheme 
of reorganization for the civil establishments. The subject of super¬ 
annuation had not been referred directly to the Playfair Commis¬ 
sioners, but they stated in their first report that it had been “forced 
on their attention.” The chief obstacle to the establishment of 
their scheme of organization was the presence of large numbers of 
old men in the offices who had not died out nor been compulsorily re¬ 
tired. The only proposal relating to superannuation with which they 

a Third Report on Civil Service Expenditure. 1873. Minutes of evidence, p. v, 

& Twenty-fourth Report of the Civil Service Commissioners. 1879. Appendix 
IX, p. 568. 



112 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

dealt, however, was one that the State should give an option of 
retirement with superannuation allowance after twenty years’ serv¬ 
ice, with a view principally of quickening promotions. This they did 
not recommend. Said they: 

It has been urged that it would be economical for the State to give an 
option of retirement with superannuation allowance after twenty years’ 
service; various witnesses support this proposal, chiefly on the ground 
that it might quicken promotion. No doubt there is considerable 
force in this view if the present division into classes continues; but 
it has little weight if a service scale such as we have proposed be 
adopted. In that case the question will be simply whether a man 
with twenty years of service has an equitable right to a pension of 
20/60ths of his existing salary, just as a man at the age or 60 has to 
x/60ths, according to the number of years of his service. We do not 
see any abstract justice in the proposal. The increments upon the 
original salary have only the justification of the increased value to the 
State acquired by the official experience of the clerk. But if he leave 
the public service in the prime of life with a pension calculated upon 
this augmented salary, the State will derive little or no advantage 
for the increments which represent maturity in work; on this ground 
we have not deemed it right to support the proposal. Another con¬ 
sideration has also weighed with us. If it were fair that a clerk 
should have an option of resigning after twenty years’ service, with 
superannuation, on the ground that the service did not suit him, it 
would be necessary, in justice for the State to exercise the power which 
it now possesses in theory, but rarely exercises, of dismissing a clerk 
after twenty years when he did not suit the service. But this would 
place the clerks in a worse position than they are at present, for they 
are now entitled after a service of twenty years to count ten years in ad¬ 
dition to their service when they are compelled to retire on abolition 
of office. There is a further consideration, viz, that the adoption of 
this principle would have the effect of weakening the tie which now 
binds a man to the service, and of inducing him to look outside that 
service for his prospects of advancement. On the whole, therefore, 
we do not see any advantage, either to the State or to the clerks, in 
the proposal made to us.( a ) 

SELECT COMMITTEE OF 1885. 

Committee’s Recommendation of a Contributory Pension 

Scheme. 

In 1885 a select committee was appointed by Parliament to inquire 
into the subject of national provident insurance. Its labors continued 
for about two years, during the course of which much evidence was 
taken concerning conditions imposed by various private employers 
of labor upon those in their employment, in order to provide for their 
superannuation. This committee was impressed with the growing 
cost of pensions, and came to the conclusion that not only the civil 

° Twenty-fourth Report of the Civil Service Commissioners. 1879. Appendix IX, 
p. 592. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 113 

but the military establishments of the State also might well follow 
the example of private business firms in requiring employees to con¬ 
tribute to their pensions. They stated in their report that they— 

Are of opinion that all persons hereafter appointed to the service 
of the Crown, whether civil or military whose service at present 
counts towards pension, should contribute towards that pension by 
a percentage deduction from salaries or pay. The steady and rapid 
growth of the pension list points to a proximate revision of the entire 
policy of burdening the public with the provision of pensions; the 
enterprise of private individuals and firms indicate the advantage 
of self-help as a condition of employment (which it might be proper 
to supplement with state-help); and your committee recommend 
that not only in service counting under the present system towards 
pension, but also in the police and other unpensioned branches of the 
public service, contribution to a pension fund should be made oblig¬ 
atory. ( a ) 

RIDLEY COMMISSION, 1886. 

On September 20, 1886, a royal commission, of which Sir Matthew 
White Ridley was chairman, was appointed to inquire into the 
condition of the civil establishments. The commission was author¬ 
ized to inquire into the numbers, salaries, hours of labor, superan¬ 
nuation, cost of the staff, and the administration, regulation, and 
organization of the civil offices. They were instructed as follows: 

You will state whether, in your opinion, the work of the different 
offices is efficiently and economically performed; whether it can be 
simplified; whether the method of procedure can be improved; and 
whether the system of control is deficient or unnecessarily elaborate. 

As ten years have now elapsed since the adoption of the scheme 
of organization recommended by the Playfair Commission, the time 
has come when the working of the scheme may, with advantage, be 
reviewed. You will, therefore, report whether the scheme has 
been fairly tried; whether its provisions have met the requirements 
of the service, and deserve confirmation and whether any modifi¬ 
cations are needed to give it complete development. 

Lastly, you will examine the non-effective charge of the civil 
service, and advise whether the present pension scales and regula¬ 
tions are equitable alike to the State and to its servants. ( b ) 

Growth of “The Deferred Pay” Argument. 

While the recommendations of this commission in regard to super¬ 
annuation were not acted upon, the record of the inquiry made by 
it into the working of the pension scheme and the evidence sub¬ 
mitted to it on the feeling of the civil servants in regard to the way 

a Second Report of Commission on Civil Establishments. 1888. Appendix, p. 423. 

&Idem, p. v. 

35885—S. Doc. 290, 61-2-8* 



114 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

in which they were pensioned are of great significance to the student 
of the British superannuation system. The most striking fact 
brought out was the development of the idea suggested to the Com¬ 
mittee on Civil Expenditures appointed in 1873, that the pension is 
a substitute for increase of salary, or, as it may be more forcibly 
stated, that the pension is actually paid out of the salary. The 
phrase that came into vogue at the time of this inquiry and which 
has been current ever since was this: “Pensions are deferred pay.” 
We see, instead of gratitude for the grant of pensions the growth of 
a conviction that salaries are lower than they would be without 
pensions, and by an amount more than sufficient to pay the cost of 
pensions, and a spirit of discontent spreading from that belief. 

Abolition of Pensions Proposed by Sir Robert Hamilton in 
Favor of Savings Scheme. 

A memorandum was submitted to the commission by Sir Robert 
Hamilton which created the greatest interest both among members 
of the commission and members of the civil service, and which 
became the center of debate that has ever since continued around 
the words “ deferred pay.” 

Attacking the existing pension system as a system of “ deferred 
pay,” and maintaining therefore that it is “ clearly inequitable to 
withhold from the representatives of a man who dies on full pay the 
deferred pay which he has earned,” Sir Robert Hamilton proposed 
a complete change in the system. Assuming that part of the salary 
was being withheld as “deferred pay” to be returned to those mem¬ 
bers of the service who became pensionable, he suggested that it 
would be better to place this amount to each man’s credit in the 
government savings bank, to be returned to him with interest on 
his withdrawal from the service or to his representatives in case of 
his death. What he proposed was virtually an abolition of the 
pension system and the adoption of a savings arrangement. In 
view of the serious consideration given his memorandum and the 
discussion of the basic principles underlying the whole theory of 
superannuation which it opened up and which has gone on ever 
since in England, the most important part of that memorandum is 
here given: ( a ) 

The reference to the commission to “examine the noneffective 
charge of the civil service, and advise whether the present pension 
scales and regulations are equitable alike to the State and to its 
servants,” is an extremely important one. The Playfair Commission 
did not deal with this subject beyond expressing their opinion that it 
would not be desirable to give clerks the option of retiring, say, after 


“Second Report of Commission on Civil Establishments. 1888. Memorandum, 
pp. 572, 573. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


115 


20 years’ service, instead of being required as at present to serve until 
they, are 60 years of age. I have long thought that the present 
pension system required radical alteration. 

Payment of superannuation can not be defended on the ground of 
its being a charitable contribution, for the State as the trustee of the 
people’s money would not be justified in making any such use of it. 
But it can be defended on the ground that it is a means of procuring 
cheaper service and keeping down the amount of the salaries which 
would otherwise be payable. In other words, it represents deferred 
pay; but if this be so, it appears to me to be clearly inequitable to 
withhold from the representatives of a man who dies on full pay the 
deferred pay which he has earned. 

Another defect of the present system is, that while deferred pay 
should bear some proportion to the varying rates of pay received for 
active employment, the pension is fixed solely with reference to the 
salary paid in the last three years of service. 

Again, in the civil service, but still more so in the military services, 
huge future liabilities are often incurred by some concession or alter¬ 
ation which makes but little addition to the estimates of the year in 
which the change is effected, and which never receive the attention 
they deserve. To give a very simple case: If an officer receiving, say, 
£600 [$2,919.90] a year, is allowed to progress by £25 [$121.66] a 
year to £900 [$4,379.85], the estimates for the year show only an 
increase of £25 [$121.66] a year until the maximum is reached. But 
when that man comes to retire instead of getting two-thirds of £600 
[$2,919.90] or £400 [$1,946.60] a year as pension lie gets two-thirds of 
£900 [$4,379.85] or £600 [$2,919.90] a year. The capital value of 
this addition in the shape of pension (taking the rates laid down for 
commutation) would be £200 [$973.30] x 9.19 = £1,838 [$8,944.63]. 

If it were possible to make the estimates of each year bear the 
whole charge, both effective and noneffective, incurred in that year, 
a most valuable check would be created upon extravagant retire¬ 
ment schemes, and Parliament would know exactly what it was 
asked to sanction. 

I think a scheme for superannuation could be devised which would 
meet this important requirement, and also secure that each man, or 
his representatives, received the exact amount of his accumulated 
deferred pay. The only real difficulty and objection is that it would 
involve a largely increased charge during the peiiod of transition 
from the one system to the other. 

Assuming that for every £100 [$486.65] now paid in salaries there 
is £20 [$97.33] paid in pensions, and that this is a fair proportion to 
maintain, when a clerk is appointed at £100 [$486.65] a year, £120 
[$583.98] should be provided in the votes in respect of him. Of this, 
£100 [$486.65] would be paid to him, and £20 [$97.33] placed to his 
credit in the Government savings bank. On this amount he would 
have no claim whatever until his retirement. But when his service 
came to an end, he or his representatives, if he died in service, would 
receive his deferred pay which would be accumulating to his credit 
at compound interest. 

The advantages attending such a plan over and above the two main 
ones which I have pointed out would be very great: 

(1) The proportions of deferred pay could be varied to suit the 
differences of service, e. g., in services such as certain grades of the 


116 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

Army and Navy, and the Police, in which physical energy is essential, 
and it is not desirable to retain men beyond 40 or 50 years of age, the 
proportion of deferred pay might be greater than in the case of clerks. 
It might also be somewhat raised to meet the case of what is called 
“professional qualifications” under sec. 4 of 22 Viet., c. 26. 

(2) So long as the service did not suffer from the withdrawal of the 
official experience of a clerk, and the office should of course always 
have the power of vetoing a retirement, it would not matter from a 
pecuniary point of view after what length of service a clerk might elect 
to retire. 

(3) It would be much easier than it is at present for a department 
to get rid of inefficient men. Some small addition might be added 
for compensation when a clerk was required to retire before 60 years 
of age; but this would have to be provided for in the estimates for 
the year in which he retired, and would only be awarded if his record 
was very good. In other cases it would be a condition of service that 
he must retire when required to do so by the head of his department, 
on his deferred pay alone. I attach great importance to this power. 
Men, especially towards the top of an office, should be judged by a 
high standard, and removed without hesitation if they fail or cease 
to come up to it. 

(4) No trouble could arise about re-employing men who had been 
pensioned, for the cost to the State would be the same in all cases. 

(5) The whole of the costly machinery for the payment of pensions 
might eventually be got rid of, and a large saving thereby effected. 

(6) The heartrending cases which now constantly occur of good 
men dying in harness, without having been able to make any provi¬ 
sion for their families, would be largely met. 

Not only would such a scheme enormously promote economy and 
efficiency, but I feel certain that it would be most acceptable to the 
civil servants as a body. 

I see no way of dealing satisfactorily with the question of super¬ 
annuation short of such a complete change in the system. The pres¬ 
ent system is defective throughout. Clerks practically can not be 
got rid of until they are 60 years of age, however inefficient they may 
be, except by making a shuffle of the cards, called a “reorganization 
of office,” and by giving them certificates that they have served with 
“zeal and fidelity.” Even when they are 60, although they can 
themselves claim to go, there is no statutable power to get rid of them. 
It is true that the War Office and Admiralty have made office rules on 
this point, and enforce compulsory retirement at the age of 60, 
extended in some cases to 65, but their competence to issue such rules 
is not entirely clear. I regard compulsory age retirement as abso¬ 
lutely essential to keep an office in a state of efficiency, whatever the 
system of superannuation may be. 

I should extend commutation to all pensions. It costs the Gov¬ 
ernment nothing, and is a benefit much prized by the service. From 
my scheme (supra) it will be seen that I attach no importance to the 
policy of the State securing a yearly provision for its servants in 
place of compensating them once for all, and leaving them to make 
their own investments. But if the regulations of the Treasury 
minute of 28th October, 1882, are maintained, which limit the com¬ 
mutation to two-thirds of the pension, or to such less proportion of 
it as leaves an amount of not less than £80, I can see no reason that 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


117 


can, from any point of view, be urged against making all pensions 
commutable. 

Approval of Sir Robert Hamilton's Proposal Expressed by 
Officers of the Treasury. 

Study of the testimony taken by the commission shows a sur¬ 
prising agreement on the part of the witnesses with the suggestion 
of Sir Robert Hamilton to abolish the pension system and establish 
instead a savings scheme which would enable the civil servant, on 
retiring from the service, to take his money in a lump sum or, on 
dying, to leave it to his representatives; in other words, to commute 
the pension he would receive if he remained to the pensionable age. 
Approval of Sir Robert Hamilton's suggestion in the main was 
expressed by high officials of State, such as Sir Reginald Welby and 
Sir Herbert E. Maxwell, who constituted the committee on pensions 
and superannuation at the Treasury, and Sir Thomas Henry Farrer, 
permanent Secretary of the Board of Trade, as well as by humbler 
members of the service, such as clerks at the Board of Trade, in the 
Post-Office, and in the Inland Revenue Office. Others who were 
not questioned particularly about their view of Sir Robert Hamil¬ 
ton's suggestion nevertheless took occasion to praise a contributory 
system—provided refund of payment was allowed—for two reasons. 
They thought it superior to the existing system because it enabled 
the heads of departments to dismiss inefficient clerks without cruelty 
and it softened the hardship caused to families of clerks who died 
in harness. The assumption that a pension was “deferred pay"— 
that is, that something was virtually being deducted from salaries all 
along in order that pensions might be granted at the end of the 
service—seems to have been tacitly accepted by all witnesses. The 
majority of them argued also for the funding of the contributions. 
The experience of English railways in retiring their employees seems 
to have made a generally favorable impression, especially the scheme 
of the London and Northwestern Railway Company's fund, which 
was based on contributions of per cent of salary from the em¬ 
ployees, with the addition of an equal amount from the company. 
Compulsory retirement at a given age was unanimously urged, and 
calculation of the pension on the basis of the mean salary rather 
than the ultimate salary was approved, by many as less expensive 
for the State and entirely just to the civil servant. (°) 

a For evidence in regard to superannuation submitted to the Ridley commission, 
see Summary of Second Report of the Ridley Commission Appointed to Inquire into 
the Civil Establishments of the Different Offices of State at Home and Abroad, 1888, 
p. lxxiii. Evidence of Sir Reginald Welby, Sir Herbert Maxwell, Sir Algernon West, 
Sir E. Du Cane, Sir Thomas Farrer, Messrs. Mowatt, Dawson, Whittle and Parkhouse, 
Jastrzebski and Day, Lushington, Moran, Giffen, Hawkes, Bullock and Barnes, Salin, 
McCormick, Calcraft, and Blackwood. 



118 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

Assumption that Postponed Charge is Made by the State to 
Pay Pensions Accepted by Sir Reginald Welby. 

The testimony of Sir Reginald Earle Welby, before the Ridley 
Commission is particularly interesting and significant, not merely 
because as permanent Secretary of the Treasury and a member with 
Sir Herbert Maxwell of the Treasury committee on superannua¬ 
tion he was in a position to make important observations on the 
working of the existing system, but because his testimony shows that 
in the fifteen years which had elapsed since, as Mr. Welby, principal 
clerk for financial business of the Treasury, he had testified before the 
Committee on Civil Expenditures in 1873, his views as to the needs of 
the service in the matter of superannuation and what could and should 
be done in the interests of the public had undergone some develop¬ 
ment. In 1873, although he stated that the action of Parliament in 
1857 in abolishing the system of deductions was against the wish of 
the Treasury and the Government of the day, he seemed disposed to 
regard the incident as closed. In 1886 he was not by any means so 
sure that the chapter written in 1859 establishing a universal pension 
system should be accepted as final. lie expressed himself as in 
favor of the principle of the London and Northwestern Railway 
pension scheme, namely, a contribution by the servant supplemented 
by a similar contribution from the employer, and said he saw no 
reason why this principle should not be introduced in the civil service, 
although the fact that in the civil service salaries are sometimes 
largely increased might be an element of difficulty in forming a 
solvent fund. He was very decidedly of the opinion that a bona 
fide fund should be created, and not merely a paper fund. Said he: 

I think the minds of statesmen, the chancellors of the exchequer, 
and of the Government, have considerably changed within the last 
thirty years in that sense. Thirty years ago the idea was to have no 
funds; to pay everything into the exchequer as it came. The con¬ 
sequence was that neither a minister nor head of a department, nor 
clerk ever watched the workings of any scheme. The evil of not 
watching the working of a system has come forcibly home of late 
years, and our tendency now is to favor in any scheme of this kind 
the creation of a fund. (°) 

He was therefore not in favor of a contribution by the clerk simply 
as so much in aid of the exchequer charge for pensions (the motive 
that had prompted the Superannuation Act of 1834), but thought 
the contributions by employer and employee should be “put into 
the fund and managed on actuaries’ calculations, so that the fund be 
kept solvent.” He believed that a personal account should be kept 
with each subscriber and that the actual contributions of the civil 


a Second Report of Commission on Civil Establishments. 1888. Minutes of 
Evidence, p. 402. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


119 


servant should be returned in case of death or resignation. He stated 
also that the State had profited by the limited commutation of pen¬ 
sions which had been allowed. Asked whether he would rather 
attempt to keep the existing system with modifications or to set up a 
fund, he answered: 

I have always regretted the abolition of the old superannuation 
deductions, as I think it was a mistake. I think a greater part of the 
mistake was due to the fact that the Government took no trouble to 
carry it out fully, or to give back to men that which had been taken 
out of their pockets, but, if the old deduction had been retained upon 
a reformed system, I think that would have been very fair. (°) 

Confusion in Sir Reginald’s Mind as to Amount of Postponed 

Charge. 

While Sir Reginald made no very definite proposals as to the details 
of a “ reformed system,” he made it clear that he, like Sir Robert 
Hamilton, stood for certain definite principles. These were the 
acknowledgment that the existing system, while on its face a pension 
scheme pure and simple, was in reality a contributory scheme; the 
establishment of a system which should be avowedly a contributory 
system, State and civil servant each contributing to a superannuation 
fund; this fund to be actuarially administered; and contributions 
to be returned on withdrawal from the service whether by death or 
resignation. His ideas as to the amounts which would have to be 
contributed by the State and by civil servants and the scale of 
pensions which could be allowed to establish a sound and feasible 
scheme were hazy, but he was perfectly clear as to the principles 
involved. Said he: 

We have this position. On one side we have a great company which 
works its nonefiective system by taking 2 \ per cent from the employee 
and giving 2 \ per cent itself. On the other side we have the State 
working an extremely liberal scale of pension which involves a post¬ 
poned charge of from 12 to 15 per cent, compensations apart. There¬ 
fore the question lies, I presume, somewhere between these points. 
For instance, the State might contribute 10 per cent and the individ¬ 
ual 5 per cent. * * * We might go further. The contributions 

being prepaid and accumulated, you might work a liberal pension 
scheme with 8 per cent and 4 per cent, or a proportion of that kind, 
according as you would find it necessary. My impression is that we 
shall not get a really permanent settlement of the question on the 
basis of so small a contribution by the State of 2 \ per cent. That is 
what I want to bring before the commission. ( b ) 

This is interesting because it shows Sir Reginald’s acceptance of 
the assumption that the State makes a “ postponed charge of from 

o Second Report of Commission on Civil Establishments. 1888. Minutes of evi¬ 
dence, p. 404. 

& Idem, p. 402. 



120 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


12 to 15 per cent, compensations apart/’ in order to pay pensions. 
Including compensations, he figured the postponed charge at 20 per 
cent, the same assumption made by Sir Robert Hamilton in his 
memorandum. As this assumption underlies all the agitation that 
has hung around the words “ deferred pay,” and as it is persistent 
to this day, Sir Reginald’s explanation of its origin is important. 
Said he: 

I came across the other day some evidence which I have not seen 
anywhere else. It was an attempt made by the then actuary of the 
Government to estimate what the future normal charge of the present 
pension system would be. It was not an official paper; it*was a semi¬ 
official paper, and the date of it is 1869. He took 10 of the big ordi¬ 
nary clerical offices, such as the Customs and the Inland Revenue. 
I am not quite convinced that his salary list would not be subject to 
reconsideration and some alteration, but I may say generally that 
what he arrived at was this. Take the salaries of any offices as they 
stand, go forward from thirty to thirty-five years, and you will find 
the normal noneffective charge on the present pension scale will be 
from 12 to 15 per cent of the salaries of the thirty years previously. 
That was his estimate of the normal cost to the State of the present 
pension law—leaving out compensations.^) 

This is a perfectly reasonable conclusion for the actuary to have 
reached, for there is always a definite relationship between existing 
pensions and the salaries of a generation ago, since the pensioners of 
to-day are those who were on the active pay roll thirty years ago. 
In other words, the effective vote of to-day becomes the noneffective 
vote of to-morrow, allowance being made on one hand for deaths, 
resignations, and reduction of the pension by the amount which it 
is less than the salary, and on the other hand for increases in salary, 
a total diminution roughly estimated amounting to about 80 per 
cent. That the ratio of the existing pensions and compensations to 
past salaries amounted to 20 per cent in 1869 is therefore highly 
probable. This important statement was not, however, fully under¬ 
stood by all who referred to it, as will be seen later on. 

Assumption that Postponed Charge is Made by the State to 
Pay Pensions Accepted by Sir Herbert Maxwell. 

That Sir Herbert E. Maxwell, Sir Reginald Welby’s colleague in 
the Treasury, had also given the subject of superannuation very care¬ 
ful study is evidenced by his testimony. Like Sir Reginald and Sir 
Robert Hamilton, he thought a complete change in the pension 
system was desirable. Sir Herbert prepared for the use of the com¬ 
mission a memorandum on the origin and development of superannua¬ 
tion and retired allowances in the civil service, with an analysis of 

a Second Report of Commission on Civil Establishments. 1888. Minutes of 
Evidence, p. 402. 





CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 121 

the alternative remedies against the growth of the ineffective vote. 
Like Sir Reginald, he was clear as to the principles which should be 
laid down in the solution of the problem but admitted his inability 
to see how the details could be worked out satisfactorily. He was 
also pessimistic as to whether or not the most ideal system would 
be proof against probable assault, on political grounds, from Parlia¬ 
ment. Said he: 

If it were possible to provide any guarantee for the permanence 
of a superannuation fund, it is difficult to see what objection could be 
raised against it. But in view of the fate which befell the last fund, 
it is only too probable that the same forces which prevailed against 
it would prevail again, namely, pressure on and by members of 
Parliament. ( a ) 

Questioned by the commission as to his views he declared: 

I have a very strong opinion that the reestablishment of a super¬ 
annuation fund would be to the advantage not only of the public, 
but also of the service. In the first place, the estimates of the 
year would show the liabilities of the year, and there would not be 
deferred liabilities, as there are under* the present system. * * * 
They do not show the prospective additions (as well as the retro¬ 
spective). * * * They do not show, for example, the liabilities 

that are incurred by a reorganization. I think Sir Robert Hamilton 
gives an illustration of that. ( * 6 ) 

Contending that the estimates should bear the whole charge, both 
effective and noneffective (that is, both salaries and pensions) incurred 
in that year, he said: 

That would be the result of establishing a superannuation fund. 
You would pay a servant so much, and you would deduct so much 
as a contribution to the fund, and that money would be invested 
for him by the State, and on his leaving the service, either by death 
or by retirement or by superannuation, would be handed over to 
himself or his representatives, plus the interest. That seems to me 
the most direct and the most advantageous plan. It would make 
pensions what they profess to be now, but are not, literally deferred 
pay. It is only overshadowed by one great difficulty—parliamentary 
pressure. 

“ You are clearly of the opinion that anything which brings before 
the public and the taxpayers of the country prominently, the fact 
that pensions are deferred pay, would be a good thing ?” queried the 
chairman. 

“Yes;” answered Sir Herbert, “because that is the only warrant 
for pensions now. That is the ground on which they are based.” ( 6 ) 

He pointed out other advantages of a superannuation fund, as he 
saw it, such as “a right to compel to retire on the one side, and a 
right to retire on the other with some sum which represented deferred 
pay which had been earned,” and the disappearance of the distinction 


« Second Report of Commission on Civil Establishments. 1888. Appendix, p. 423. 

& Idem. Minutes of evidence, p. 154. 



122 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


between established service and temporary service, a distinction 
which caused great difficulty in the administration of all departments. 
From his experience at the Treasury he declared also that he would 
indorse Sir Robert Hamilton’s statement, “I should extend commuta¬ 
tion to all pensions. It costs the Government nothing, and is a 
benefit much prized by the service.” 

The practical question of how to proceed to put into practice 
the principles he felt to be the correct ones that should underlie a 
proper superannuation system he confessed himself unable to answer. 
Said he: 

I think the alternative is a triple one, if I may say so, either the 
abolition of pensions altogether, the employment of men at full pay 
and washing your hands of all responsibility for their future after 
they have done their work, or secondly making them contribute to 
a superannuation fund by which they should be under an arrange¬ 
ment which would entitle them at cessation of service to receive their 
full amount of contributions, plus interest; or, thirdly, making them 
contribute to this fund and receiving a pension as under the present 
system. It involves such a deal of actuarial calculation that of 
course I hesitate to offer an opinion as to the requirements of the last 
two alternatives. ( a ) 

A member of the commission hereupon queried: Would the first 
of the last two alternatives require an actuarial calculation? You 
would simply pay back the man what he paid in? 

“No, it would not” answered Sir Herbert, “but if you undertake 
the annuity instead of handing over the lump sum, it would. Of 
course the first of those two is the simpler, but it is attended with 
this disadvantage, that when you get down to the lower grades, when 
you get to artisans and copying clerks and so on, if they leave the 
service and they receive a certain amount of that money, you have 
no guarantee that they will invest it properly or that they will not 
fall into very distressing circumstances and so reflect discredit on 
their former employers.”( a ) 

The chairman then asked Sir Herbert if it was his idea that deduc¬ 
tions should be made from present salaries, or if he agreed with Sir 
Robert Hamilton in thinking that present salaries should be raised 
in order to get that fund. To this Sir Herbert replied: 

Of course if you proceed on the assumption that the present 
salaries are calculated on a lower rate in consequence of the pros¬ 
pective advantages, you would have to raise the salaries if you make 
the people provide their own prospective advantages; but that is a 
very large question. I should think, as a matter of fact, that in a 
great many cases the rate is not lower in the Government than 
outside. ( a ) 


“Second Report of Commission on Civil Establishments. 1888. Minutes of evi¬ 
dence, p. 155. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 123 

Confusion in Sir Herbert’s Mind as to Amount of Postponed 

Charge. 

It should be noted that, in assuming that pensions were deferred 
pay, Sir Herbert misinterpreted the statement of the actuary of 1869 
that the postponed charge of present pensions was from 12 to 15 
per cent of past salaries. Since his interpretation of that statement 
seems to have become current, and is referred to in a subsequent 
inquiry conducted by a royal commission in 1902, it is important to 
know just what his error was. He said: 

The contribution which would have to be levied from pay and 
salaries to support a fund for the payment of superannuation on the 
present scale and conditions, has been variously estimated at from 
12£ to 16 per cent. There exists a difficulty in calculating the pre¬ 
cise deduction necessary, owing to the fluctuating rate of promotion 
in the departments and the consequent uncertainty as to the rank 
which may be attained at a given age.( a ) 

Asked for his authority for this statement, Sir Herbert said: “I 
believe it was an actuarial computation which Sir Reginald Welby 
obtained.” The statement of Sir Herbert is not, however, implied 
by that of the actuary of 1869, for although the normal cost of exist¬ 
ing pensions might be 12 to 15 per cent of past salaries it would take 
much less deduction of salaries than 12 per cent to pay for the pensions, 
since the operation of compound interest over a long period of years 
is a factor which has a very important bearing on the subject, but 
which Sir Herbert overlooked entirely. 

Disapproval of Sir Robert Hamilton's Proposal Expressed by 

Mr. Mowatt. 

Probably the most conservative opinions in regard to alteration of 
the existing scheme were held by a witness whose testimony was of 
importance because of his official position and because certain state¬ 
ments made by him were misunderstood and later misquoted. He 
was Mr. Frank Mowatt, the permanent officer at the Treasury who 
was principally responsible for the granting of pensions. Mr. Mowatt 
took the view and expressed it in half a dozen ways, that the civil 
servant was better off and better satisfied to have his salary “at the 
full market rate of wages" and to be “left to manage his own pecu¬ 
niary concerns" in whatever manner he thought best, than to be 
given a pension, but that it was impossible practically to carry on 
the government service in that way without pensions, because when 
the time for retirement came the Government would be “forced to 
provide him with a pension, not on the equity of the case so much 

a Second Report of Commission on Civil Establishments. 1888. Minutes of evi¬ 
dence. Appendix, p. 423. 



124 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


as because he would appeal so directly to the sentiment of com¬ 
passion.’ J In his view, therefore, pensions were necessary, but 
existed “not so much for the benefit of the public servant as for the 
benefit of the public.” In another place he said: “I think the best 
arrangement is to pay the civil servant the full market rate of his 
wages and leave him to provide for himself on his retirement.” 

Although he implied in these statements that the civil servant, 
because of his pension, was paid less than “the full market rate of 
wages,” Mr. Mowatt was unwilling to admit that pensions were 
deferred pay. He refused to admit it apparently because the con¬ 
clusion it led to was one he did not care to entertain. Said he: 

I think the definition of deferred pay, though convenient, is not 
exact; because if it were adopted it would carry with it some conse¬ 
quences which are not recognized in our present system. If pension 
were a deferred pay it would be the absolute property of a civil 
servant. You must give it to him whenever and for whatever cause 
he retires, or if he should die in the service it would belong to his 
estate; again, if it were deferred pay, it must be calculated, not 
upon the salary upon which he retires, but on the salary which he 
has received from year to year. (°) 

Asked if he saw no advantage in granting the recipient the rights 
implied in the theory of deferred pay he simply said he would rather 
not do so, but gave no reason for his preference. He said that Sir 
Robert Hamilton’s suggestion was practically a proposal to com¬ 
mute all pensions, but he did not say why that should in his opinion 
not be done. He said he would define pension “ as a payment made 
by the State to entitle it to retire the officer, or to discontinue his 
services whenever the interest of the State requires it.” 

He was averse to making changes in the existing system. He 
thought the scale of pensions very fair, and he held that abolition 
terms were necessary in order to facilitate reorganization. Asked if 
he did not think it would be advantageous to have the pension bear 
some proportion to the amount of years served at each rate of salary, 
in other words to be calculated on the mean instead of the ultimate 
salary, he said: 

I see no advantage in the change; because as I have said, I regard 
the pension as the sum paid by the State to enable it to get rid of its 
inefficient officers; and so long as the um is sufficient to induce the 
controlling authority to act, it is immaterial which way you calculate 
it. ( b ) 

One reform he did stand for staunchly, and that was compulsory 
retirement at age sixty-five. He would not even permit the reten¬ 
tion in office of exceptional men after they had reached that age. 

° Second Report of Commission on Civil Establishments. 1888. Minutes of evi¬ 
dence, p. 156. 

bldem, p. 158. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


125 


He thought the formation of a fund by deductions from salary full 
of difficulties, owing principally to the pressure on and by members 
of Parliament and the resistance of members in the service. Stating 
that he believed the rates of salary in the bulk of the civil service to 
be slightly in excess of those in commercial houses, and that therefore 
deductions for a superannuation fund should be effected by stoppage 
from salary rather than by addition to it, he was led to admit that 
a scheme which provided for the return of the deductions, with 
interest, would decrease the difficulty of getting rid of incompetent 
servants. 

Confusion in Public Mind Regarding Mr. Mowatt’s Testimony 

as to Amount of Postponed Charge Actually made by the 

State. 

The part of Mr. Mo watt’s testimony which came to be historic was 
that which related to the ratio between the effective and noneffective 
charges. In answer to a question, Mr. Mowatt made the statement 
that the nonelfective charge was from 16 to 20 per cent of the effective, 
or as it would be expressed in the United States, “the amount paid 
for pensions was from 16 to 20 per cent of the amount paid for 
salaries.” Attention should be called to the fact that there is no 
connection between present pensions and present salaries. The 
relationship lies instead between present pensions and past salaries, 
or between future pensions and present salaries, since those on the 
salary roll of one generation are found on the pension roll of the next. 
It is a question, however, that is often asked by the laity: What per 
cent of salaries are the pensions? It was asked Mr. Mowatt and he 
answered: From 16 to 20 per cent. Unfortunately, he had just 
been asked by another member of the commission a totally different 
question in regard to what authority Sir Herbert Maxwell had for 
the statement made by him, and mentioned above, that the amount 
of deductions from salaries necessary to set up a fund had been 
“variously estimated at from 12£ to 16 per cent of salary.” There 
was no connection between the two questions and the two answers, 
as a careful reading of the evidence will show r , but based on this 
testimony, nevertheless, the statement was made in later years that 
Mr. Mowatt, of the Treasury, had told the Ridley Commission that 
from 16 to 20 per cent was deducted from the salaries of civil servants 
to provide pensions. The text of this evidence became of such im¬ 
portance in the course of a future inquiry that it is here given in full. 

Mr. Harvey. Supposing this commission should come to the con¬ 
clusion that it would be advisable to attempt to set up such a fund, 
for a moment putting aside your view, are you able to tell us upon 
what data the estimate was framed to wdiich Sir Herbert Maxwell 
refers when he says, at the bottom of page seven of his memorandum, 


126 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

that the contributions have been “ variously estimated at from 12J 

to 16 per cent?” , ,. 

Mr. Mow att. I am aware that there was an actuarial calculation, 
though professedly incomplete, in a certain number of offices which 
gave that estimate ) but it did not include any calculation touching 
abolition of office. 

Lord Lingen. If we took as a rough test the proportion of pen¬ 
sions to salaries, is it not the general opinion that about 20 per cent 
of the effective represents the noneffective charge ? 

Mr. Mowatt. I have made calculations myself, but they have 
never been complete, and I could not support them absolutely. But 
I should say from my experience that you would find the noneffective 
charge was about an addition of between 16 and 20 per cent. 

The Chairman. Even more than 20? I should think it was quite 
a sixth. I make it out to be between 16 and 18 per cent. 

Mr. Harvey. Do you mean that if a civil servant entering under 
the ordinary conditions has £100 [$486.65] a year salary, the real 
charge that the State has to undertake for him under the present 
system is £118 [1574.25] a year? 

Mr. Mowatt. I should say at least. (°) 

Approval of Sir Robert Hamilton’s Proposal Expressed by 

Others. 

Sir Thomas Henry Farrer, for thirty-six years in the Board of 
Trade, first as Assistant Secretary and finally as permanent sole 
Secretary, was inclined to look with favor on the change of pension 
system proposed by Sir Robert Hamilton, because it would prevent 
posterity from being charged with the expense of the present service. 

(1) Would 'prevent pensions being charged to posterity. 

Sir Thomas said: 

Sir Robert Hamilton gives two principal reasons in favor of his 
proposed change. The first is that as a matter of principle the Gov¬ 
ernment have no right to give anything in the form of charity, there¬ 
fore you must look upon the existing pension as deferred pay. Then 
he says if it is deferred pay the man ought to have it whether he dies 
in harness or not. I think that is true logically, but it is rather 
theoretical. If a man joins the service upon the present terms I do 
not think he can complain if he gets what he has agreed to. Then 
comes the other reason, which is that by the present system we are 
charging posterity for present service. That seems to me a very 
strong reason indeed. The burden of the pension fund is growing, 
and the facility of charging posterity with it tends to great laxity in 
granting it. If you could in any way put the burden of the year upon 
each year and let it appear in the estimates, it would be an immense 
improvement. Sir Robert Hamilton gives some other reasons. He 
says that it is a very extravagant plan to make the pension depend 


a Second Report of Commission on Civil Establishments. 1888. Minutes of evi¬ 
dence, p. 162. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 127 

upon the last three years of the man’s salary, and that it ought to 
depend upon his whole service. I am disposed to agree with him there, 
but there is no reason why the present scheme should not be altered 
in that respect. ( a ) 

Although he made no reference to the memorandum of Sir Robert 
Hamilton, Sir Algernon Edward West, head of the Inland Revenue 
Service, gave some testimony which showed him to be in sympathy 
with the idea of reverting to a contributory plan of superannuation. 
Asked if he had “any suggestions to make for a reduction of this 
enormous noneffective charge,” he responded: 

I am sorry to say I am old enough to recollect the time when five 
per cent was deducted from my salary when I entered the service 
to pay my superannuation fund. In 1857 Lord Naas brought for¬ 
ward in Parliament the abolition of that fund. I made up my mind, 
even then, that if Sir George Lewis had met what I then thought, as 
a clerk, the just grievances of us clerks, he might have saved that 
gift of £75,000 [$364,987.50] to the civil service. I recollect we 
thought that if this five per cent was deducted from our salaries all 
through our career and we died immediately after forty years’ service, 
and the State got the whole of our deductions, that was an injustice. 
I should be very much inclined, if you ask my opinion, to say that 
I think it would be a very fair thing to revert to the five per cent 
deduction from salaries for pensions, thereby reducing the charge of 
superannuation on the State, but with the distinct understanding 
that these deductions should be the absolute property of the person 
who pays them. 

Do you mean that he should get it at any period before he had 
earned his pension, or, if he died, that his representatives should get 
it? asked the chairman. 

No, not before, but if he died in the service, that his representatives 
should get that part of it which he had himself subscribed. I do not 
think it is fair that the State should make a profit out of the deduc¬ 
tion ; neither do I think it is fair that the State should profit by what 
I call ill luck of the man; when a man has served forty years and dies 
the day he retires, I do not think that the State should profit by that 
misfortune, and I think the sum which has been deducted from his 
salary should be returned to his representatives, but if he lives to 
ninety the pension he has received from year to year till then should 
have been subscribed to a large extent by himself. ( 6 ) 

(2) Would facilitate dismissal of inefficient employees. 

On being asked what regulations he would make in the event of 
desiring to get rid of a man for inefficiency before he had earned his 
pension, he answered, 

I think it might facilitate that very desirable object of being able 
to push a man out if you felt that he was not going out to starve. 

a Second Report of Commission on Civil Establishments. 1888. Minutes of evi¬ 
dence, p. 381. 

b Idem, p. 254. 




128 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

I think that whatever he subscribed himself, if he was not qualified 
for a pension from the State, he should have, unless he was absolutely 
guilty of fraud or misconduct. I do not think the State ought to 
make money out of these deductions. ( a ) 

To the heads of offices generally the possibility that Sir Robert 
Hamilton’s plan might offer a means of getting rid of inefficient 
employees before they had reached an age at which they could be 
pensioned without harshness to the individual or expense to the State 
was very attractive. Most of them made statements showing that 
this difficulty was one of the most delicate administrative problems 
which they had to solve. ( b ) Many of them stated their belief that 
a system of deductions from salary to be repaid on retirement would 
facilitate getting rid of inefficient men.( c ) The only way in which 
they had been able, under the law, to rid the office of inefficient clerks 
was through a reorganization of the force in such a way as to abolish 
the office of the incapable incumbent. He could then be retired 
under section 7 of the Act of 1859 on “abolition terms;” that is, he 
was dismissed with a compensation allowance calculated on the same 
scale as if he were qualified for a pension. A reorganization of the 
office was not always possible, and the practice arose of getting rid 
of undesirable clerks by grants of gratuities. In awarding them, how¬ 
ever, the Treasury was acting ultra vires, as it had no statutory power 
to do so. While, the Ridley Commission was still taking evidence, 
Parliament enacted a retrospective measure designed “to whitewash 
the Treasury” for its drastic efforts to get rid of the incapables.C) 
This was the second clause of the Superannuation Act of 1887, a sup¬ 
plementary law which made provision for three sets of individuals 
not provided for in the earlier act: (1) Civil servants whose retire¬ 
ment was advantageous to the service because of what one Treasury 
official euphemistically described as “inculpable inability ;”( g ) (2) civil 
servants injured in the discharge of their duty or their dependents, 
in case of the death of the injured servant; and (3) hired persons not 
on the established list but dismissed after more than a year’s “tem¬ 
porary” duty. 

Not much hope was entertained that this new act would be helpful 
to administrative officers in their efforts to eliminate the inefficient 
from the service. It was generally thought to be too severe to be 
operative, since no man could be retired under that second clause 

a Second Report of Commission on Civil Establishments. 1888. Minutes of evi¬ 
dence, p. 254. 

b Idem, pp. 219, 266, 274, 285, 337. 

c Idem, pp. 78, 254, 266, 274, 339. 

d Idem, p. 151. 

e See testimony of T. L. Heath, Report of Royal Commission of 1902, par. 58. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 129 

unless a minute was laid before Parliament as to the exact cause of 
his retirement. (°) 

Mr. Gabriel Moran, superintendent of the registry at the Home 
Office, said: 

I question whether heads of departments would like to have a 
man branded publicly for life as inefficient. It strikes me as dam¬ 
aging to that first clause that you have to lay a minute before Parlia¬ 
ment saying a man is inefficient. ( b ) 

The general feeling of high officials in regard to the removal of 
inefficient subordinates and their ready approval of Sir Robert Ham¬ 
ilton’s suggestion in this respect is well reflected in the testimony 
of the Honorable Robert Henry Meade, Senior Assistant Under Sec¬ 
retary of State at the Colonial Office. The chairman said to him: 

Has it occurred to you at the Colonial Office that you some¬ 
times have a man who has been eight or ten years in the service, 
and who is evidently not fit for the service, not a man of bad charac¬ 
ter or anything of that sort, but a man whom it would be desirable 
to remove if possible, and who himself would be desirous to go, if 
he could take with him, not exactly a pension, but some small gratu¬ 
ity or something that he had earned in the nature of deferred pay ? ( c ) 

To this Mr. Meade answered: 

That of course is a difficulty, and it is one I suppose that all depart¬ 
ments have felt from time to time. I think we have been on the 
whole very fortunate. I think that every department must expect 
to be weighted with a certain proportion of what I may call lame 
ducks, and our .object must be to keep that percentage down as 
low as possible. If you were able to make some arrangement such 
as you suggest, I think it would be a great assistance. At present 
you can not get rid of a man, because it is practical ruin to him. 
On the other hand I do not know that the law which was passed 
last year wdll help us much; because I do not think that the head 
of an office would like to gibbet a man before Parliament as incom¬ 
petent so that I do not anticipate very much effect from that.( c ) 


a Clause 2 of the act of 1887 read as follows: 

Where a civil servant is removed from his office on the ground of his inability to 
discharge efficiently the duties of his office, and a superannuation allowance can not 
lawfully be granted to him under the superannuation acts of 1834 and 1859, and the 
Treasury think that the special circumstances of the case justify the grant to him 
such retiring allowance as they think just and proper, but in no case exceeding the 
amount for which his length of service would qualify him under sections two and 
four of the Superannuation Act, 1859, without any addition under section seven of 
that act. 

A minute of the Treasury granting an allowance under this section to any civil 
servant shall set forth the amount of the allowance granted to him, and the reasons 
for such allowance, and shall be laid before Parliament: Provided , That the Treasury 
before making the grant shall consider any representation which the civil servant 
removed may have submitted to them. 

b Second Report of Commission on Civil Establishments. 1888. Minutes of evi¬ 
dence, p. 57. 

eldem, p. 78. 

35885—S. Doc. 290, 61-2-9* 



130 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


Sir Thomas Farrer alone was a little skeptical of the claim made 
for Sir Robert Hamilton’s proposed plan that it would facilitate 
the dismissal of inefficient employees, but he admitted that theo¬ 
retically the contention was sound. He said: 

It is no doubt theoretically, perfectly true, but I think it over¬ 
looks what is the real difficulty of getting rid of useless men. There 
is a certain difficulty in the soft-heartedness of heads of departments 
and of ministers. But there is a very much greater difficulty in the 
pressure which is put upon them by members of the House of 
Commons. (°) 

Asked if he did not think that the ability to give a man, on leav¬ 
ing the service, the money he had contributed would help to get rid 
of incompetent men, he answered: 

No, I do not think it would, unless the House of Commons passes 
a self-denying ordinance, and refuses to interfere with the ministers 
in the management of their departments. 

At all events it would take away a good deal of possible sym¬ 
pathy for an incompetent man if it was known that he had received 
a certain allowance of money? suggested the chairman, and to this 
Sir Thomas said, “ Certainly.” ( a ) 

With less reluctance he admitted that the proposed change might 
have a good effect on the tendency to abolish an office in order to 
rid it of an undeserving officer by putting him on a pension, a policy 
that had been found to “make great and most unsatisfactory addi¬ 
tions to the pension charge.” Said he: 

Yes, I think in principle it would be a good thing. Let me say 
with regard to abolition that I agree most heartily as to what you 
say of the abuse of abolition terms. I think it is one of the great¬ 
est possible abuses that you should be obliged to pay high to get 
a bad man to go. It is not only the harm that it does in the way 
of extravagance and expense, but it is such a discouragement to the 
good men in office. ( 6 ) 

Approval of Sir Robert Hamilton’s Proposal Expressed by 
Civil Servants. 

The advantage claimed for Sir Robert Hamilton’s suggested plan 
that made the strongest appeal to the civil servants themselves 
was that it would lessen the hardship caused to families of clerks 
dying in harness if the accumulated deferred pay of a clerk was 
then turned over to his family. Their interest in this phase of the 
problem was what might be expected, in view of the arguments 
and representations made by the committee of civil servants in 1856. 
It will be remembered that what a large number of them asked for 

a Second Report of Commission on Civil Establishments. 1888. Minutes of evi¬ 
dence, p. 382. 

' b Idem, p. 385. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 131 

most earnestly at the time the pension plan was established was not 
that the deduction be abolished, but that half of it be remitted 
and the other half collected into an insurance fund for the benefit 
of their dependents. What they had criticised in the old contrib¬ 
utory system established by the Act of 1834 was the fact that it 
made no provision for their widows and orphans and took contribu¬ 
tions that might otherwise have bought insurance for them. 

Representing the assistant clerks at the Board of Trade, Mr. S. 
Bullock and Mr. A. Barnes stated that they considered pensions as 
deferred pay and were inclined to agree with Sir Robert Hamilton’s 
memorandum. “It proposes,” said Mr. Barnes, “that a proportion 
of the salary should be deducted, and that the salary so put aside 
should be available, in the case of the death of the civil servant, for 
his representatives. That seems much fairer than the present sys¬ 
tem.” Asked if he thought that the service would in that case be 
unpopular with good men, if the salaries were fixed, including the 
additions, at figures lower than those then paid, Mr. Bullock re¬ 
plied: “I believe it would be a great advantage, and that it would be 
received with great satisfaction.” 

Messrs. J. W. Curra, C. G. Hawkes, and C. D. Upham, representing 
clerks in the Post-Office, said that after carefully reading the state¬ 
ment by Sir Robert Hamilton, they, “as lower division clerks, and 
young men having lately entered,” would “very much like to see 
some scheme such as that proposed in operation rather than the 
present one.” Mr. Hawkes stated that they were in favor of a lump 
payment in lieu of a pension because under the existing system, 
“however hard a man is worked, however much he deserves his pen¬ 
sion, if he dies in harness his friends get not a halfpenny.” He 
thought, however, that the deductions for the lump sum on retirement 
should be paid by the Treasury. Mr. Upham stated that their sal¬ 
aries would not permit any deductions toward pension, maintaining 
that civil servants were not so well paid as men in commercial circles. 

Mr. E. T. A. Kennedy and Mr. T. W. McCormick, representing 
clerks in the Inland Revenue Office, saw no objection to deductions 
from salaries being made toward a pension fund if salaries were made 
sufficiently large to bear it. They were averse to any further deduc¬ 
tions, but if a new scheme were adopted by a supplemental provision, 
such as Sir Robert Hamilton suggested, of 20 per cent in the esti¬ 
mates, they thought that a great many of the civil servants would 
be prepared for a deduction. “At any rate,” said Mr. McCormick, 
“their legal representatives could take that on their death, and that 
would obviate the great hardships that now exist of the wife being 
left helpless on a man’s death.” 

It was not only the low-salaried clerks of the service who main¬ 
tained that the existing pension system worked a hardship on their 


132 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

families, if they happened to die in office. Sir Algernon West, a 
high administrative officer, said: 

It is very curious that the State is extraordinarily liberal to its 
servants in every way but one. For instance, with my service, I 
might have a year’s leave. I might have six months on full pay and 
six months on half-pay if my health was to fail. I call that extraor¬ 
dinary liberality. But on the other hand, if in the height of my 
work I was to die, from that hour my pay would cease; that I do not 
think liberal, because I always think it is impossible that a man’s 
expenses can cease from the moment of his death, and therefore I 
have always thought that a little bit of illiberality on the part of the 
Government. It is the only little bit I know, I am bound to say.(°) 

The last witnesses to appear before the commission in regard to the 
subject of superannuation were Messrs. T. T. S. de Jastrzebski and 
Henry Day, who represented the general body of the lower division 
clerks and had been requested by the general committee of that body 
to present the views of the lower division clerks to the commission. 
In view of the fact that the superannuation acts of 1859 and 1887 
provided free and universal pensions on a most liberal scale for all 
permanent civil servants besides gratuities for many employees not 
classified as permanent, the earnest request of this large body of 
clerks that the pension system be abolished and that they be allowed 
to contribute to their retirement is surely very astonishing. There 
seems to be no record, on the other hand, that any representative 
of the public service appeared before the commission to dispute the 
claim so generally made that the clerks were already practically con¬ 
tributing to their pensions. Said Mr. Day: 

There is a very strong feeling, not only in the lower division but 
throughout the general service, especially when there is anything 
like a stagnation of promotion, that the Act of 1859 is certainly inad¬ 
equate in its provisions. Having searched through many of the rail¬ 
way companies and banks, in respect to their pension systems, we 
come, as lower division clerks specially, to the conclusion that their 
systems are more liberal and sufficient and much more fitting the 
needs of their clerks than what the Act of 1859 does for the junior 
civil servant. 

“ Would you be willing to take the London and Northwestern 
scheme?” he was asked, and made the following answer: 

No, I would offer the best points of all schemes for such a class of 
men as the junior civil servant, that is, (1) I would ask for optional 
commutation of all pensions; (2) I would ask for the balance of the 
unabsorbed deferred pay after a man had been superannuated but 
had not exhausted his fund; (3) I would ask for the deferred pay of 
the clerk dying in harness being paid to his representatives; and (4) 
I would ask for the deferred pay to be made to a man retiring volun¬ 
tarily after ten years’ service. ( b ) 

° Second Report of Commission on Civil Establishments. 1888. Minutes of evi¬ 
dence, p. 255. 

& Idem, p. 412. 





CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN, 133 

Asked what conditions he coupled with that in the way of deduc¬ 
tions from salary, Mr. Day said that he thought the lower division 
clerk would gladly pay his contribution and that he understood 2J 
per cent was deemed necessary from the employees in the case of 
the various railway companies providing half the money. 

Growing Cost of Civil Pensions. 


The cost of superannuation was naturally a question into which 
the Ridley Commission inquired. Valuable data on this subject were 
supplied them by Sir Herbert Maxwell and Mr. Mowatt. Sir Her¬ 
bert showed the growth of the civil service vote for superannuation 
from the years 1833-34 to 1868-69 by the following table:(°) 


Year. 

Amount. 

Year. 

Amount. Year. 

Amount. 

1833-34. 

$272,363 
286,432 
322,250 
359,659 
386,079 
404,951 
427,206 
442,608 
399,053 
408,786 
395,646 
417,546 

1845-46. 

$390,780 
393,213 
424,359 
375,694 
535,884 
529,319 
526,580 
658,725 
647,147 
660,734 
674,541 
713,122 

1857-58. 

$777,871 
792,699 
812,652 
864,840 
900,984 
898,872 
858,752 
902,585 
872,963 
904,624 
958,871 
1,337,640 

1834-35. 

1846-47. 

1858-59. 

1835-36. 

1847-48. 

1859-60. 

1836-37_ 

1848-49. 

1860-61. 

1837-38. 

1849-50. 

1861-62. 

1838-39. 

1850-51. 

1862-63. 

1839-40 . 

1851-52. 

1863-64. 

1840-41.. 

1852-53. 

1864-65. 

1841-42 

1853-54. 

1865-66. 

1842-43 

1854-55. 

1866-67. 

1843-44 

1855-56. 

1867-68. 

1844_45 

1856-57. 

1868-69...... 





As explained on page 30, the cost of superannuation in the Reve¬ 
nue Departments, the Admiralty, the War Office, and the Royal 
Irish Constabulary was not included in the civil service vote after 
1832. In 1868-69 a number of noneffective charges were transferred 
from various effective votes to the superannuation estimate. After 
1869-70 the appropriation accounts as given by Sir Herbert Max¬ 
well were as follows:(°) 


Year. 

Superan¬ 

nuation 

allowances. 

Compensa¬ 

tion 

allowances. 

Compas¬ 

sionate 

allow¬ 

ances. 

Compensa¬ 
tion and 
compas¬ 
sionate 
allowances. 

Gratui¬ 

ties. 

Total. 

1869-70 . 

$802,530 

(*>) 

0>) 

(*) 

$818,467 

$5,742 

$1,622,798 

1870-71 . 

851190 

(*>) 

971,626 

77,226 

1,900,042 

1871—72 . 

912,177 

( b ) 

( b ) 

1,062,809 

25,402 

2,000,438 

1872 73 . 

948,724 

(*) 

(») 

1,055,422 

28,260 

2,032,406 

1873-74 . 

1,014,023 

( b ) 

(&) 

1,061,826 

18,483 

2,094,332 

1874-75 . 

1,050,984 
1,089,449 

( 6 ) 

( b ) 

1,030,224 

9,392 

2,090,600 

1875-76 . 

(») 

( 6 ) 

1,002,752 

11,373 

2,103,574 

1876-77 . 

\, 106,856 

(&) 

(*) 

1,029,425 

6,346 
14,132 

2,142,627 

1877 78 . 

1,136,269 

$1,065,150 

$14,264 

1,079,414 

2,229,815 

1878-79 . 

L160,140 
1,178,837 

977,402 

15,349 

992,751 

12,565 

2,165,456 

i879-80 ’ . 

962,599 

15,680 

978,279 

13,592 

2,171,194 

1880-81 . 

1,238,018 

938,904 

17,320 

956,224 

14,089 

2,208,330 

1881-82 . 

1,263,450 

905,140 

18,824 

923,964 
910,775 

11,782 

2,199,449 
2,189,735 

1882 83 . 

1,262,536 

891,791 

18,984 

11,816 

1883-84 . 

1,279,734 

892,297 

19,850 

912,147 

12,687 

2,204,568 

1884-85 . 

1,321,269 

876,160 

19,266 
17,568 

895,426 

11,972 

2,228,667 

1885-86. 

1,356,736 

851,535 

869,103 

13,315 

2,239,155 


a Second Report of Commission on Civil Establishments. 1888. Appendix, p. 422. 
b Not separately reported. 
























































































134 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

For the year 1887-88 Sir Herbert stated that a vote of £476,082 
($2,316,853) was taken in the civil service estimates for super¬ 
annuation and retired allowances, besides £1,412,622 ($6,874,525) 
provided for superannuation in the estimates of the several depart¬ 
ments. Thus the total sum voted for superannuation of public ser¬ 
vants (exclusive of military and naval pensions) was £1,888,704 
($9,191,378). It is not clear from Sir Herbert’s statement whether 
this sum included allowances to the Royal Irish Constabulary and 
the Dublin Metropolitan Police or not, but comparison with Mr. 
Mowatt’s statement of the cost of civil pensions for the following 
year, 1888-89, would seem to indicate that it did. Mr. Mowatt’s 
statement shows that the total sum voted for the superannuation of 
public officers in that year amounted to £1,907,863 ($9,284,615), 
including the Royal Irish Constabulary and Dublin Metropolitan 
Police, and to £1,581,992 ($7,698,764) excluding them. Besides 
this great sum voted by Parliament for that year, civil pensions to 
the amount of £345,517 ($1,681,458) were granted out of the con¬ 
solidated fund, which would make a total expenditure of £2,253,380 
($10,966,073) lor civil pensions. 

Report of the Commission. 

The report made by the Ridley Commission on the subject of 
superannuation in the civil service, as the result of its investigations, 
contained recommendations that have not been perpetuated in legis¬ 
lative enactments, but the report is nevertheless significant and valu¬ 
able to the student as marking the development of certain ideas in 
England, in regard to the subject of pensions for civil servants, and 
it is well worthy of study. ( a ) 

After first stating that the vote for superannuation and retired 
allowances in the year 1888-89 amounted to a gross total of £1,581,992 
($7,698,764.07), exclusive of £671,388 ($3,267,309.70), paid for pen¬ 
sions to the Royal Irish Constabulary, the Dublin Metropolitan 
Police, and other pensions charged on the Consolidated Fund, the com¬ 
missioners reviewed the arguments advanced by the Commissioners 
of 1857, from the public point of view, against the contention that 
the only duty of the Government should be to pay adequate salaries, 
and leave its servants to make proper provision for their own future 
wants and those of their families, and concluded, like their prede¬ 
cessors, that, in spite of the heavy charge, public interest would be 
“best consulted by maintaining a system of superannuation allow¬ 
ances.” They then took up the proposal of Sir Robert Hamilton 
that the pension system be abolished altogether by voting each year 
the whole additional sum which represents the calculated charge 


See Report of Ridley Commission on Superannuation, pp. XIX-XXV. 





CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


135 


entailed by the present pension scale, investing it separately in a 
government fund, the amount of each member's deferred pay, with 
compound interest, to be returned to him or his representatives on 
his separation from the service. 

Rejection of Sir Robert Hamilton 1 s proposal. 

To this proposal the commission saw “fatal objections." Said 
they: 

We can not accept the conclusion that the present pension is 
deferred pay in any such sense as that, whereas it is now terminable 
with the pensioner's life, its capitalized equivalent should go to his 
representatives, and this as a mere addition to the present heavy 
charge, with no corresponding benefit to the public in the shape of a 
contribution by a civil servant, or otherwise. 

And whatever might be the proportion fixed between what should 
be regarded as deferred pay and the actual working salary, the 
immediate addition to the annual estimates would be very large; 
and seeing that these estimates now bear the noneffective charges 
imposed by the action of past generations, it would hardly be tolerated 
that they should also bear the burdens of the future. 

The payment, moreover, of a lump sum is open to the obvious 
objection that in the event of improvidence or misfortune in the use 
of it, the retired public servant may be reduced to circumstances 
which might lead to his being an applicant for public or private 
charity. ( a ) 

Recommendation that deductions be made from salary. 

Recognizing, however, that Sir Robert Hamilton's proposal had the 
two special advantages so strongly urged by officials and clerks of 
the service who had appeared before them, namely, that it would 
assist in the dismissal of the inefficient and afford relief to the families 
of clerks dying in the harness, they proposed to gain such advantages 
by deducting five per cent from the salaries of all employees, and 
returning it with compound interest on the separation of the employee 
from the service. 

Their recommendation to this effect is thus set forth: 

With a view both of levying some direct contribution from the 
civil servant towards his pension, and of providing at the same time 
a sum of money which, in the event of a man's death or retirement 
without pension, should be available for his representatives or for 
himself, we recommend a compulsory deduction of 5 per cent from 
all future salaries. An account should be kept in favor of each clerk, 
and in the event of his dying or leaving the service voluntarily or 
otherwise, before becoming entitled to a pension, he, or his repre¬ 
sentatives, * * * should receive back the whole of his con¬ 
tributions, with the addition of compound interest at the rate 
allowed by the Post-Office Savings Bank. 

a Second Report of Commission on Civil Establishments. 1888. Report, pp. XX 
and XXI. 



136 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


We think also that, while it would entail a very small extra 
charge upon the State, it would be fair and reasonable to provide 
that, in the event of the death of any pensioner before the total 
amount received as pension has reached the whole of the sum deducted 
from him during his serivce, his representatives should receive a sum 
equal to the difference between such total deductions and the amount 
received as pension. 

It might be provided that the whole salaries should be voted an¬ 
nually, and the 5 per cent deductions be placed to a separate fund in 
the hands of the National Debt Commissioners, the amount due, as 
above, to each clerk, being secured to him by act of Parliament and 
being paid to him on the determination of his service. Under such 
an arrangement the State would, of course, have to. receive in some 
form or other the sum standing to the credit of every person who 
becomes entitled to a pension. 

On the other hand, it might be decided not to invest these deduc¬ 
tions separately or to create any fund. The salaries might be voted 
annually less the 5 per cent, the estimates of each year receiving the 
advantage of the deductions and the State being liable (as under the 
other arrangement) for the amount of them, whenever they became 
due, or, in the event of a pension being attained, for the amount of 
such pension, towards which it would have received such deductions 
in relief. 

If this whole charge, taking into consideration the conditions and 
regulations which we recommend, be actually calculated, it will be 
easy to determine the liabilities of each year. These liabilities in 
respect of new servants will, of course, increase annually, but they 
will ultimately be very much less than the present noneffective 
charges. ( a ) 

This means that the commission recognized the truth of the state¬ 
ment that “ pension is deferred pay,” but that they repudiated the 
idea that the deferred pay should be returned to the civil servant in 
any other way than as a pension. They took the stand that the 
deferred pay was practically the same as a premium paid to a life 
insurance company for the purchase of a deferred annuity on the 
condition that if death occurred prior to the beginning of the annuity 
the premiums paid would be forfeited to the company. They held 
that this deferred pay of the civil servants was only sufficient to pro¬ 
vide the pension for those who survived to pensionable age and that 
if a refund of contributions was desired—and they appreciated the 
advantages of such a refund—an additional contribution would be 
necessary. In the same way the premium paid to a life insurance 
company for the purchase of a deferred annuity on the condition that 
if death occurs prior to the pension age the premiums paid will be 
returned must be larger than if the annuity is purchased on the con¬ 
dition that the premiums will be forfeited to the company in case of 
death. The commissioners recommended, therefore, that in order 

a Second Report of Commission on Civil Establishments. 1888. Report, pp. XXI 
and XXII. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 137 

to secure this desirable refund a compulsory deduction of 5 per cent 
be made from all future salaries. They argued that the compulsory 
saving of 5 per cent of salaries would not only furnish some assist¬ 
ance in the elimination of the inefficient from office and relief of de¬ 
ceased employees’ families, but it would have the additional advan¬ 
tage of lightening to that extent the heavy charge on the State for 
payment of superannuation allowances. The plan they proposed 
was, in effect, a return to the old contributory plan established by 
the Act of 1834 and abolished in 1857 with the important difference 
that provision was made for a refund of contributions in case of death 
or resignation before the servant reached the pensionable age. The 
idea of funding the contributions was expressly repudiated, the logic 
employed by the Commissioners of 1857 in regard to that question 
being accepted as good. 

Minor recommendations. 

This recommendation constituted the gist of the Ridley Commis¬ 
sion's report on the subject of superannuation in the civil service, but 
other important minor recommendations were also made. “With 
an eye to the injustice of having the pension system the spoil of the 
inefficient,” they condemned clause 2 in the bill passed the previous 
year (the Superannuation Act, 1887) which gave power to the Treas¬ 
ury to grant retiring allowances to persons removed from office on 
the ground of their inability to discharge their duties efficiently. 
They recommended also the immediate repeal of clause 7 in the Act 
of 1859 which gave a compensation allowance to those retired on the 
pretext of “abolition of office.” They took the view that any large 
reorganization of an office or offices should invariably be carried out 
by means of an act of Parliament, or at least by provisional orders in 
council approved by Parliament, and that the abolition of a single 
appointment should be effected by transferring the officer to another 
department, if possible, or by attaching other duties to him tempora¬ 
rily, or by not filling the vacancy when it occurred by promotion or 
otherwise. 

The two reforms so frequently urged—compulsory retirement at a 
given age and calculation of the pension on the average instead of the 
final salary received the commission’s careful consideration. With 
the Superannuation Commission of 1857 and the Select Committee 
of 1873 they agreed that it was absolutely essential to fix an age for 
compulsory retirement. They suggested 65 as the age. Said they: 

There should be no exception to this rule, except in the case of 
certain scheduled offices, in which the officer if asked by the Govern^ 
ment to do so, might be allowed to extend his services for a further 
period never exceeding five years. 


138 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


It should be clearly understood that at the age of 60 a man may be 
required to retire by the head of his department upon such pension 
as by his length of service he is qualified to receive. He may, if he 
pleases, retire voluntarily, at this age, and the State should have the 
corresponding power of retiring him, if it be for the advantage of the 
service. ( a ) 

The proposal to calculate the pension upon the average salary dur¬ 
ing the whole period of service instead of upon the average salary of 
the last three years did not meet the entire approval of the commis¬ 
sion, and they recommended that it be calculated instead on the last 
ten years’ service. Said they: 

We have satisfied ourselves that to calculate the amount upon the 
average salary throughout service would result in a reduction of 
pensions to an extent that would be altogether inexpedient, and 
we think, on the whole, that the case will be met by fixing the pension 
in proportion to the average salary of the last ten years of service. 
We do not propose any alteration in the existing scale of pensions, 
viz, for each completed year of service 1/60 of the civil servant’s 
salary, subject to a maximum of 40/60, no pension being in any case 
awarded for less than ten years’ service. ( * & ) 

In this recommendation they were undoubtedly influenced by the 
contention of Sir Reginald Welby, when before them, that to calcu¬ 
late pensions on mean salaries instead of salaries ultimately attained 
to would cause too great a reduction in the pensions and might lead 
to a movement for increase of salaries, already a very difficult thing 
to control. He was of the opinion that the case might better be 
met by an extension of the number of years upon the average salary 
of which pensions are now calculated, and the commission appears 
to have shared his views. 

The award of a pension for life after a service of only ten years 
was justified by the commission as right and politic, since it must at 
best be small, beginning at one-sixtieth of the salary, and could only 
be awarded in the case of a real and permanent breakdown of health. 
The Government is further protected, too, in the matter of disability 
allowances by requiring candidates for office to pass a strict medical 
examination. 

The provision enabling a higher pension to be given for professional 
offices by adding a number of years to the actual service years was 
condemned by the Ridley Commission. Said they: 

This was intended to meet the case of men coming into the service 
at a somewhat advanced age, and with special acquirements. But, 
in our opinion, such a man is better remunerated by a sufficient salary 
which, being an immediate charge, is likely to receive greater atten¬ 
tion than a prospective addition to pension, and we see no reason 
why the pension should bear a higher proportion to the salary in these 


° Second Report of Commission on Civil Establishments. 1888. Report, p. xxiii. 

6 Idem, p. xxii. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 139 

cases than in others. If our proposal, too, is adopted of taking the 
average of the salary for the last ten years as a basis, an officer who 
has earned a high and non-progressive salary will get the advantage 
to which he is entitled. (°) 

In closing their report on superannuation the commissioners thus 
summed up the benefits which they believed would follow the adop¬ 
tion of their recommendations: 

If the above conditions are enforced, we believe that the pension 
system so amended will be equitable alike to the State and to the 
public servant. 

The pension, though less in amount than at present, in consequence 
of its being calculated on the average salary of the last ten years of 
service, will yet in our opinion be adequate, and the public "servant 
will have contributed something towards the charge. He will at the 
same time be secured the return of the whole of his contributions 
with compound interest in the event of his not coming on to the 
pension list. 

The State, on the other hand, will be relieved from the heavy pay¬ 
ments under the head of compensation allowances which it now has 
to bear, it being calculated that if these are omitted the charge for 
superannuation would be from 12 to 15 instead of 20 per cent, as at 
present, on working salaries. The State will also not only pay pen¬ 
sions at a lower rate, as explained in the preceding paragraph, but 
will also have received in aid of such reduced pensions a contribution 
of 5 per cent from the salaries of all those who become entitled to 
superannuation. ( b ) 

Criticism of the commission’s chief recommendation . 

While a casual reading of this report of the Ridley Commission 
gives the impression that a very plausible solution of a difficult prob¬ 
lem for a country burdened with a heavy pension charge is here offered, 
more careful study shows that two important points were entirely 
overlooked by the commissioners when they made their chief recom¬ 
mendation. They neglected to consider, when they contemplated 
the cost of putting the plan suggested by Sir Robert Hamilton into 
operation, and condemned it on the score of costliness, the important 
part played by compound interest in all such calculations. In the 
second place, they failed to see that their proposal to make a deduc¬ 
tion of five per cent of salaries to be refunded, but only in case of 
death or resignation before reaching pensionable age, coupled with 
the assumption that pension is deferred pay, was distinctly unfair to 
the civil servant who lived to pensionable age. 

Sir Robert Hamilton’s proposal that for every £100 ($486.65) paid 
a civil servant £20 ($97.33) should be deposited to his credit in the 
government savings bank was presumably based on the assumption 
that the amount of deferred pay was 20 per cent of salary. It has 


a Second Report of Commission on Civil Establishments. 1888 Report, p. xxiii. 
6 Idem, p. xxv. 



140 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

been shown that this assumption had its origin in the statement of 
an actuary in 1869 that the normal cost to the State of existing pen¬ 
sions was 20 per cent of past salaries, including compensations, or 12 
to 15 per cent excluding compensations. 

Sir Robert Hamilton overlooked the fact that much less than 12 or 
15 per cent of present salaries —probably not more than from 7 to 10 
per cent would have to be set aside to pay for future pensions, owing 
to the fact that interest would be compounding during all the years 
the sum for the pension was accumulating. Sir Herbert Maxwell 
made the same error, as has been pointed out, in stating to the com¬ 
mission that “the contributions which would have to be levied from 
pay and salaries to support a fund for the payment of superannuation 
on the present scale and conditions, has been variously estimated at 
from 121 to 16 per cent.” 

It is clear that the establishment of the plan suggested by Sir 
Robert Hamilton would have meant a temporary increase in the 
already heavy charges paid for pensions, and on that ground alone 
the commissioners were unwilling to recommend it. Neglecting to 
take into consideration the operation of compound interest, they did 
not perceive the increase in the estimates would have been an increase 
of from 7 to 10 per cent only instead of from 12 to 20 per cent. This 
would have amounted virtually to an increase of that much in the 
general rate of salaries, but would have resulted finally, by the time 
all employees in the service at the time of the establishment of the 
plan were dead, in the complete abolition of the pension system and 
the full operation of a self-supporting savings scheme. Unfortu¬ 
nately for the success of his ideas with the commission, Sir Robert 
laid down principles merely, worked out no details to show how the 
principles should be applied, and had no statistics of the existing 
civil service to demonstrate how the cost of establishing his plan, 
although large, would be a saving in the long run, since a general 
increase in salaries of from 7 to 10 per cent must be much less than the 
total vote for pensions. 

The proposal made by the commission in lieu of Sir Robert’s plan 
was not fair to the employees for this reason: The commission 
admitted that the employees were already in fact suffering a deduction 
equal to the value of the pure pension without return of premiums; 
to withhold an additional five per cent of salaries on the condition 
that, if the employee entered on the pension which he had already 
theoretically paid for, the five per cent actually withheld from his 
salary should go to the State to reduce the cost, and in case of death 
only such portion of the five per cent accumulations should be 
refunded which had not been paid to him in pensions, was equivalent 
to requiring the employee who entered on a pension to pay for a pure 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


141 


deferred annuity on the scale provided for by law and then in addition 
to provide for the purchase of a second annuity (which was never 
granted him) by contributing five per cent of his salary throughout 
the whole term of his service. (°) 

SUPERANNUATION ACT OF 1887. 

The superannuation act which had been passed in 1887 while the 
Ridley Commission was investigating the civil establishments of the 
United Kingdom made provision for certain classes of civil servants 
not provided for by the Act of 1859. Mention has already been 
made of the provision contained in clause 2 for the retirement of 
inculpable inefficients and the disapproval of this clause expressed 
by the Ridley Commission. 

Pensions to civil servants compelled to retire in consequence of an 
injury sustained in the actual discharge of duty without their own 
default are granted under clause 1 of the act. Pensions are also 
awarded under this same section to the widows and children of civil 
servants killed in the execution of their duty. The scale of pensions 
is fixed in each case by treasury warrant. This clause constitutes a 
repeal of section 5 of the Act of 1859, being more liberal in its terms. 

The allowances granted to public servants under this section in 
case of injury are calculated in the Treasury warrant regulating the 

° To illustrate just what this proposal would mean, take a concrete case, and for sim¬ 
plicity of illustration suppose the salary paid in American money. Let the case be 
that of a person entering the service at 20 years of age, having a salary of $100 a month, 
and retiring at the age of 60 on a pension of $720 a year. The value of such a pension, 
payable quarterly, beginning at the age of 60 may be stated as $7,787. Therefore, 
under the provision proposed by the Ridley Commission that, in addition to the theo¬ 
retical deduction which he was already making to provide this $7,787, the employee 
should also contribute 5 per cent of salary during his period of service, the result 
would be as follows: 

That he had purchased a deferred annuity, by theoretical deductions, having a 
value of $7,787, and that he had, by actual deductions of 5 per cent of salary improved 
by 3£ per cent interest during a period of 40 years, purchased another deferred annuity 
having a value of $5,169, so that in the aggregate, theoretically and actually, he had 
contributed $12,956 to purchase a pension the value of which under any of the condi¬ 
tions laid down was to the employee but $7,787. In case he accepted the pension 
he would forfeit all of his $5,169 except such excess as might remain at his death over 
and above the amount of pension which he might have received, or if he resigned the 
day before the pension began, he would receive a refund of $5,169 and forfeit his 
pension having a value of $7,787, so that under only one condition would he have 
been fairly treated by the plan proposed by the commission and that would have 
been in case of death prior to the date of retirement, when his own accumulations 
with interest would have been returned. The only way then in which the commis¬ 
sion’s proposal could have been made fair to the civil servant would have been by a 
general increase of 5 per cent in salaries to correspond to the 5 per cent deduction. 
If this had been done the practical result, however, would have been the same as 
under the plan suggested by Sir Robert Hamilton. 



142 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

grants on three different scales. The first applies to established 
officers of prisons or criminal lunatic asylums injured by the violence 
of a prisoner or lunatic; or established officers of a manufacturing 
department of the War Office or Admiralty in which the duties are 
exceptionally dangerous. The second applies to all established 
civil servants not falling under the above description and all hired 
persons whose duties are exceptionally dangerous. The third scale 
applies to all other hired persons employed in a public department. 
When his capacity to contribute to his support is totally destroyed, 
a member of the first class receives twenty-four-sixtieths of his 
salary, a member of the second class twenty-sixtieths. When his 
capacity to contribute to his support is materially impaired, a member 
of the first class receives eighteen-sixtieths of his salary, a member of 
the second class fifteen-sixtieths. When his capacity to contribute 
to his support is simply impaired, a member of the first class receives 
twelve-sixtieths of his salary, a member of the second class ten- 
sixtieths. When his capacity to contribute to his support is but 
slightly impaired, a member of the first class receives six-sixtieths of 
his salary, a member of the second class five-sixtieths. This is with 
the proviso that no award on the first scale, together with the allow¬ 
ance for which the injured man would be qualified by length of 
service, shall exceed the amount of his salary or £300 ($1,459.95) a 
year, whichever is less, and that no award on the second scale together 
with similar allowance shall exceed fifty-sixtieths of his salary, or 
£300 ($1,459.95) a year, whichever is less. 

For hired persons employed in a public department, constituting 
the third class affected by this injury warrant, Scale III provides a 
gratuity of one-third of the employee’s salary if his capacity to con¬ 
tribute to his support is slightly impaired, two-thirds if it is impaired, 
and the whole amount of his salary if it is materially impaired, or else 
£100 ($486.65), whichever is less. When the injured man’s capacity 
to contribute to his support is totally destroyed he receives an annual 
allowance exceeding by fifteen-sixtieths of his salary and emoluments 
the rate of retired allowance for which he would have been qualified 
by length of service if he had been a civil servant, provided that the 
total award does not exceed forty-five-sixtieths of his salary, or £300 
($1,459.95) a year, whichever is less. 

Provision is also made by this Treasury warrant for the widows (or 
mothers) and children of the men of these three classes who are killed 
while in the discharge of duty. Widows of men pensioned on the 
first and second scales receive not more than ten-sixtieths of the 
husband’s salary, and widows of men classified under the third scale 
receive not more than eight-sixtieths. Children of the first class are 
pensioned until the age of fifteen years. Children of the second and 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


143 


third classes receive small gratuities, the total gratuity for each fam¬ 
ily ranging from £8 to £50 ($38.93 to $243.33). ( a ) 

A gratuity of £1 ($4.87), or one week’s pay for each year of service, 
is paid under clause 4 of the act, on retirement, to persons not form¬ 
ing part of the permanent civil service but engaged temporarily. 
Those who have the benefit of this provision include a great many 
hired laborers of the dockyards serving under the War Office. 

LAW UNDER SUPERANNUATION ACTS OF 1834, 1859, 1887. 

A paper prepared for the information of the Ridley Commission in 
1888 by Sir Reginald Welby gives a complete survey of the pro¬ 
visions of the three great superannuation acts in force, the acts of 
1834, 1859, and 1887. The paper is here reproduced:( * * 6 ) 

1. The grant of superannuation allowances to persons in the per¬ 
manent or established civil service of the Crown is regulated by the 
Acts— 

4 & 5 Will. 4. c. 24. (Superannuation Act of 1834) 

22 Viet., c. 26. “ “ “ 1859 

50 & 51 Viet., c. 67. “ “ “ 1887 

For practical purposes the two latter statutes only need be con¬ 
sidered. The greater portion of the Act of Will. 4. has been repealed, 
and the sections which are still in force are of an unimportant char¬ 
acter. 

2. In order to qualify a civil servant for the grant of superannuation 
allowance, he must— 

(a) if appointed since the passing of the Act of 1859, have been 
admitted to the service with a certificate from the civil service com¬ 
missioners, or hold an office specially excepted from this requirement; 

(b) have given his whole time to the public service; 

(c) draw the emoluments of his office from public funds exclusively; 

( d ) have served for upwards of 10 years; 

( e ) if under the age of 60, be certified to be permanently incapable 
from infirmity of mind or body from discharging his official duties; or 
have been removed from his office on the ground of his inability to 
discharge his duties efficiently. 

( f) be certified to have served with diligence and fidelity to the 
satisfaction of the head of his department. 

3. The scale of superannuation allowance is, for each completed 
year of service, 1/60 of the emoluments enjoyed by the civil servant at 
the date of his retirement, subject to a maximum of 40/60. If the 
civil servant has not held his office for three years, then the pension is 
calculated upon the average of his emoluments during the last three 
years. 

Extra pension is granted to civil servants living in official houses. 
For the purpose of such pension the value of a house is reckoned at 

a For warrant regulating the grant of gratuities and allowances under section 1 of 

the Superannuation Act, 1887, see Appendix IV. 

& Second Report of Commission on Civil Establishments. 1888. Appendix, pp. 
415 and 416. 



144 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


one-sixth of the resident’s salary, but in order to establish claim to 

E ension in respect of a house it must be shown that income tax has 
een paid upon the house. 

4. Pensions may be granted at a reduced rate if the misconduct or 
demerits of the officer appear to the Treasury to justify such a reduc¬ 
tion. 

5. Pensions may also be granted in excess of the usual scale— 

(a) if the retiring civil servant has rendered any special services in 
the course of his career. 

Such awards are of very rare occurrence, and are only made when 
the special services have been extraordinary in kind, and such as 
could not be considered as falling within the scope of the officer’s 
ordinary duties. 

(b) if the civil servant is compelled to retire in consequence of an 
injury sustained in the actual discharge of his duty, without his own 
default, and specifically attributable to the nature of his duty. The 
scale of such pensions is prescribed by a warrant made under s. 1. of 
50 & 51 Viet., c. 67. A special pension can in no case exceed the 
amount of the annual emoluments of the office from which the civil 
servant retires. 

( c ) if the civil servant has served in a place which has been de¬ 
clared by the Treasury, under 39 & 40 Viet., c. 53, to be an “unhealthy” 
place. In such cases two years’ service counts as three. 

6. A higher pension than could be obtained by the scale mentioned 
in par. 3 can also be awarded to the holders of offices requiring pro¬ 
fessional or other peculiar qualifications not ordinarily to be acquired 
in the public service. The amount of the pension in such cases is 
arrived at by adding to the years of the officer’s actual service a num¬ 
ber of years varying with the nature of the office and the amount of 
time which may be expected to be necessary to qualify the holder for 
the due discharge of its duties. 

7. When a civil servant is compelled by ill health to retire before he 
has completed ten years’ service, he may receive a gratuity of one 
month’s pay for each year of service. 

8. Any pensioner under 60 years of age may, if his health permits 
it, be required to serve again in any position for which his previous 
services may render him eligible. 

9. If a civil servant is killed in the execution of his duty, a pension 
may be awarded to his widow and children, the amount of which is 
regulated by the warrant referred to under par. 5 (6). 

10. A civil servant whose office is abolished, or who is compul¬ 
sorily removed from the service, in order to facilitate arrangements 
by which greater economy and efficiency may be secured, may receive 
a compensation allowance, calculated on the same scale as if he were 
qualified for a pension (see par. 3), but with the addition to his actual 
service of a number of years varying with the length of such service, 
as follows: 

Under 5 years’ service, addition of 1 year. 

Above 5 and under 10, addition of 3 years. 

10 and under 15, addition of 5 years. 

15 and under 20, addition of 7 years. 

20, addition of 10 years. 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 145 

11. Persons not forming part of the permanent civil service, but 
engaged temporarily, are not entitled to superannuation allowance, 
but receive on retirement or discharge a gratuity of £1 [$4.87] or one 
week’s pay, for each year of service. 

If, however, such a person is injured or killed in the discharge of 
his duty, a pension or gratuity may be awarded to him or his rela¬ 
tives as provided in the warrant referred to in par. 5 ( b ). 

12. It should be added that the members of the diplomatic service 
and the members of the Royal Irish Constabulary are entitled to 
pensions calculated according to the rates laid down in the Acts 32 
& 33 Viet., c. 43 and 46 Viet., c. 14, respectively; and that the award 
of pensions to the holders of certain high political offices is provided 
for by 32 & 33 Viet., c. 60. Pensions are also granted under special 
acts, 1865, 1872, and 1887 to colonial governors. 

Note .—The Act 4 & 5 Will. 4, c. 24 directed that a deduction should 
be made from the salaries of civil servants who entered the service 
after the 29th August, 1829, as a contribution towards pension; this 
deduction amounted to 2J per cent on salaries under £100 [$486.65], 
and to 5 per cent on salaries of £100 [$486.65] and more. The deduc¬ 
tion was abolished by the Act 20 & 21 Viet., c. 37. 

It will be noted that the first qualification for a pension is the 
possession of a civil service certificate. That is a document issued 
by the Civil Service Commissioners certifying to the age, health, char¬ 
acter, and education or other personal qualifications of the individual 
who receives it. A person may be an employee of the Government 
and not be pensionable, but as soon as he becomes “established,” as 
the phrase is, he becomes pensionable. This occurs on examination 
or on appointment by the head of the department and the issue of 
the civil service certificate. In several branches, especially in the 
dockyards, there are a great many persons regarded as servants who 
are not established, but who may, after a time, become so. It is 
interesting to note that before issuing a certificate the Civil Service 
Commission subjects the candidate to a severe physical examination 
in order to lessen the chances of his early application for pension. 

There are two exceptions to the rule requiring pensionable mem¬ 
bers of the public service to have certificates from the Civil Service 
Commission. Officers appointed directly by the Crown, as for 
instance, some commissioners and heads of departments, are ex¬ 
empted from the necessity of holding certificates from the Civil 
Service Commission. Officers appointed for their special professional 
qualifications are also exempted from the necessity of having certifi¬ 
cates from the commission by virtue of Section IV of the act, which 
says that persons of “professional or other peculiar qualifications” 
may be entitled to superannuation, though they may not hold their 
appointments directly from the Crown, and may not have entered 
the service with a certificate froiii the Civil Service Commissioners. ( a ) 

a See Sec. IV, Act of 1859, Appendix II. 

35885—S. Doc. 290, 61-2-10* 




146 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

The qualifications that the pensioner must have given his whole 
time to the public service and been paid out of public funds do not 
exclude any persons who would ordinarily be regarded as civil servants. 
The first excludes, for instance, auxiliary or supernumerary postmen, 
who may be cobblers or blacksmiths by trade and choose to eke out 
their incomes by devoting certain hours of the day to the distribu¬ 
tion of the mail, having only one or two deliveries. 

If the qualification in regard to the indorsement from the head of 
the department is not complied with, the full amount of the pension 
is not granted the civil servant. The Treasury makes a reduction 
according as the circumstances of the case may seem to warrant. A 
principal clerk of the Treasury before the Courtney Commission in 1903 
said: 11 There are a fair number of cases in which a small deduction 
is made, say, not more than ten per cent. The cases in which a 
greater deduction than that is made are rare.” 

The fifth qualification as to length of service is very specific. The 
service must not be less than ten years, unless the holder retires on 
abolition or reorganization of office. 

The sixth qualification for pension relates to the grounds for 
retirement from the service. The chief of these is attainment of the 
age of 60, the age chosen by the framers of the Act of 1859 as the age 
for voluntary superannuation. For the officer under 60 there were 
originally two conditions (now three) on which retirement on a 
pension was possible. They were: (1) in case of physical or mental 
infirmity, and (2) in case his place had been abolished on reorganiza¬ 
tion. 

In case of ill health the officer is able to retire on a pension, pro¬ 
vided he has been ten years in the service and the infirmity is cer¬ 
tified as likely to be permanent. If he has been less than ten years 
in the- Service when he retires on account of ill health, he receives 
instead of a pension a gratuity of one month’s pay for each year of 
service. If the invalidity pensioner recovers, the pension is not with¬ 
drawn except in the event of his declining reemployment in the 
public service if it is offered him. The power of recalling him to the 
public service is, however, in practice rarely exercised. He is free to 
follow whatever pursuits his condition may permit. The number of 
retirements for ill health short of 60 years of age is numerous. Of 
14,185 civil servants retired with pensions during the ten years end¬ 
ing the 30tli of November, 1901, 7,093 were retired for age, 6,585 for 
ill health, and 507 for abolition of office. 

The Act of 1859 made retirement on a pension voluntary at the 
age of 60. It is now optional at the age of 60 and compulsory at 
the age of 65, but the Treasury is permitted to allow a retention in 
employment up to an age not exceeding 70, if satisfied that an offi¬ 
cer’s retirement at 65 would be detrimental to the service. This 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 147 

regulation was established by clause 18 of order in council dated 
November 29, 1898. 

Power was given to the Treasury by the Superannuation Act of 
1859 not only to make a deduction from the full award of pension in 
case of misconduct or demerit, but also to award pensions in excess 
of the usual scale as a reward for special services, and to holders of 
professional offices, appointed at an age exceeding that at which 
public service ordinarily begins. In the case of officers required to 
possess professional or other special qualifications not ordinarily to be 
acquired in the public service the law provides that years not exceed¬ 
ing twenty may be added to the actual service for the purpose of 
calculating the pension. In practice an addition of ten years has 
been the maximum (except in very special cases), and since Decem¬ 
ber 20, 1888, when a Treasury minute to that effect was passed, the 
power to add years has not been exercised in respect of any newly 
created offices. 


COURTNEY COMMISSION, 1902. 

The agitation begun by the civil servants soon after the passage of 
the law of 1859 for a change in the pension system continued down 
to the present year (1909). Since the present inquiry began, that 
agitation has resulted in the legislative enactment of September 20, 
1909, which undertakes to overcome the objection of the civil servants 
to the forfeiture of their theoretical contributions, in case of premature 
death, by providing insurance benefits in lieu of a part of the pension. 
This constitutes in effect, as wdll be shown, an important modification 
of the whole theory underlying the pension system. This parliamen¬ 
tary action was based on recommendations made by a royal commis¬ 
sion, of which the Right Hon. Leonard Henry Courtney was chairman, 
appointed in 1902, “to inquire whether it is possible so to amend the 
existing system of superannuation of persons in the civil service of the 
State as to confer greater and more uniform advantages upon those 
to whom it applies without increasing the burden which it imposes on 
the taxpayer.” 

Appointment of Commission Due to “Deferred Pay” Com¬ 
mittee. 

This commission was appointed in response to a request for its 
nomination from a body of civil-service clerks organized under the 
name of the “Deferred Pay Committee.” A memorial signed by 
50,000 of their number (the membership increased soon after this to 
60,000 or 70,000) was addressed by them to the Treasury asking that, 
as there was a considerable difference between their view of the 
existing pension system and the Government’s view, the Government 


148 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


would appoint a commission to go thoroughly into the matter from 
every possible aspect, and obtain figures in connection with the 
problem to which the Deferred Pay Committee did not have access. 
This committee was formed originally of a number of civil servants 
selected from certain government offices. Later, subcommittees 
(22 in all) were formed in the leading towns of the United Kingdom. 
The smaller committees met from time to time in the different 
provincial centers, and large meetings were held at least once a year 
in London of representatives from all the subcommittees, with 
representatives from the leading public offices in London and from 
associations in the civil service, such as the Postal Clerks' Associa¬ 
tion, the Telegraph Clerks’ Association, the Customs Federation, etc. 

The first evidence heard by the Courtney Commission was from 
representatives of the Treasury respecting the existing system. They 
next gave hearings to members of the Deferred Pay Committee. 
They summoned also other members of the civil service who could 
give them information as to voluntary organizations which had been 
formed in various branches of the service for the purpose of providing 
benefits for civil servants and their dependents supplemental to the 
pensions given by the State. In further elucidation of the problem 
before them they heard witnesses with regard to pension funds and 
superannuation schemes applicable to the city of Manchester, the 
London County Council, the Great Eastern Railway Company, the 
London and Northwestern Railway Company, and the civil services 
of India and New Zealand. Three eminent actuaries w T ere also 
summoned before the commission to define and explain the principles 
that would be involved in any change of policy. 

Growth in Cost of Civil Pensions Since Ridley Commission. 

The first witness to be called by the commission was Mr. T. L. 
Heath, a principal clerk in the Treasury. He had the following 
figures worked out to show the amount of the original estimates for 
pensions during each of the fifteen years that had elapsed since the 
Ridley Commission reported in 1888. 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN 


149 


SUPERANNUATION AND RETIRED ALLOWANCES—ORIGINAL ESTIMATES. 


Vote. 

1888-89. 

1889-90. 

1890-91. 

1891-92. 

1892-93. 

1893-94. 

1894-95. 

1895-96. 

Superannuation al¬ 
lowances . 

Compensation allow¬ 
ances . 

Gratuities. 

Compassionate allow¬ 
ances . 

Prison officers com¬ 
mutations. 

Compassionate fund.. 
Middlesex registry, 
pensions, etc. 

$1,489,568 

756,896 

9,733 

16,507 

36,499 

$1,533,911 

735,508 

9,733 

15,266 

40,392 

3,407 

$1,543,873 

717,337 
14,599 

12,852 

43,798 

3,407 

$1,637,422 

673,767 

13,626 

10,940 

45,988 

3,407 

$1,633,971 

640,203 
9,733 

8,594 

47,692 

3,406 

$1,793,602 

600,920 
9,733 

10,040 

33,301 

3,407 

2,711 

$1,871,797 

553,467 

9,733 

14,220 

31,613 

3,406 

2,711 

$1,977,215 

537,140 

9,733 

14,010 

27,296 

3,407 

2,711 

Mercantile marine, 
pensions, etc. 






Total. 

War office. 

Admiralty. 

Customs. 

Inland revenue. 

Post-office, etc. 

County court officers, 
Ireland. 

Total. 









2,309,203 

867,697 

1,609,838 

964,905 

1,138,975 

854,377 

5,378 

2,338,217 
864,290 
1,636,117 
957,854 
1,096,593 
865,634 

5,377 

2,335,866 

791,293 

1,609,352 

972,531 

1,044,083 

886,287 

5,378 

2,385,150 
779,127 
1,553,387 
966,078 
1,018,889 
931,964 

5,377 

2,343,599 

749,928 

1,526,621 

949,094 

1,025,863 

1,013,269 

5,377 

2,453,714 

759,661 

1,519,321 

957,956 

1,019,001 

1,066,153 

5,377 

2,486,947 

801,513 

1,519,321 

931,380 

1,028,574 

1,117,606 

5,377 

2,571,512 

824,385 

1,544,140 

916,021 

1,053,602 

1,159,633 

5,377 

7,750,373 

7,764,082 

7,644,790 

7,639,972 

7,613,751 

07,781,392 

o7,888,008 

08,071,475 


Vote. 

1896-97. 

1897-98. 

1898-99. 

1899-1900. 

1900-1901. 

1901-2. 

1902-3. 

Superannuation al¬ 
lowances. 

Compensation allow¬ 
ances . 

Gratuities. 

Compassionate allow¬ 
ances . 

Prison officers com¬ 
mutations. 

Compassionate fund.. 
Middlesex registry, 

pensions, etc. 

Mercantile marine, 
pensions, etc. 

$2,071,469 

500,558 
12,166 

17,821 

23,384 

3,407 

2,015 

$2,134,345 

459,835 
12,166 

15,013 

17,729 

3,407 

1,723 

$2,171,418 

422,909 
12,166 

14,755 

13,490 

3,406 

1,723 

$2,244,771 

395,033 
12,166 

34,980 

9,402 

3,407 

1,324 

59,186 

$2,263,312 

381,641 
12,166 

19,150 

5,631 

3,406 

1,324 

56,266 

$2,387,057 

354,014 
12,166 

33,910 

3,849 

3,407 

1,324 

52,183 

$2,523,266 

330,061 

12,166 

34,280 

2,350 

3,406 

1,324 

49,643 

Total. 

War office. 

Admiralty. 

Customs. 

Inland revenue. 

Post-office, etc. 

County court officers, 
Ireland 




2,630,820 
845,798 
1,578,693 
896,288 
1,040,112 
1,224,699 

3,105 

2,644,218 
853,097 
1,593,292 
900,750 
1,054,892 
1,317,162 

3,105 

2,639,867 
862,830 
1,593,292 
908,517 
1,145,224 
1,483,548 

2,760,269 
893,976 
1,661,910 
935,249 
1,223,063 
1,717,821 

2,742,896 
875,970 
1,671,643 
941,940 
1,271,018 
1,863,378 

2,847,910 
917,364 
1,657,530 
933,570 
1,271,621 
1,963,876 

2,956,496 
939,234 
1,703,762 
934,280 
1,310,510 
2,059,065 

1,732 

Total. 





<* 8,217,499 

<*8,364,793 

a 8,631,555 

a 9,256,983 

<*9,338,453 

<*9,538,335 

9,905,079 


a The sum of the items does not equal this total; the figures are, however, the equivalents of those in the 
original. 


It will be noted that the return for 1902-3 showed that the charge 
for civil pensions, gratuities, compensation allowances, and all those 
allowances which came within the scope of the Courtney Commis¬ 
sion’s inquiry was £2,035,360 ($9,905,079), exclusive of pensions 
awarded under separate acts to the Royal Irish Constabulary and the 
Dublin Metropolitan Police which brought the total up to something 
like two and a half million pounds. It will be observed that the pen¬ 
sion charge as shown by the estimates had risen from £1,592,597 
($7,750,373) in 1888-9 to £2,035,360 ($9,905,079) in 1902-3. This 
increase in amount was explained by Mr. Heath to be due in some 
degree “to the expansion in the numbers of the civil service, but also 



































































150 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

to the fact that in the departments which have increased in numbers 
the pension charge comes more into force.” He showed how in the 
Post-Office, which was growing rapidly, there was nothing like the 
normal number upon the pension vote, while in other departments, 
where there was little growth in the number of employees, the 
relative number on the pension roll was much larger. 

Relation Between Cost of Pensions and Salary Charge Con¬ 
fused with Amount of Postponed Charge made by State to 

Pay Pensions. 

The members of the commission were desirous of comparing the 
amounts paid in the effective service (salaries) with the amounts paid 
in the noneffective (pensions). Mr. Heath pointed out that there 
was no fixed relation between them. He showed that the proportion 
of pensions paid for post-office employees to the salaries paid was 
something like 6 per cent only, whereas in the Customs the proportion 
of pension charge to salary charge was 30.6, the proportion being 
bound to decrease where the department was growing fast and in¬ 
crease as it stood still or reached an equilibrium. The average pension 
charge at the time throughout all the service seemed to be about 16 
or 17 per cent of salaries. He tried to make clear the point which 
seems to have given rise to so much misunderstanding, as was seen 
in the investigation of the Ridley Commission, that there is no fixed 
and necessary relationship between present pensions and present 
salaries, since present pensions are awarded on the basis of past sal¬ 
aries, and are payments to persons who are the residue of a service 
of prior years, which may have been much smaller or much larger 
than at present. Said Sir Alexander Henderson: 

“Take 1889, the year that is given here; the £1,600,000 [$7,781,534], 
the number of the employees, and the salaries paid; then the figure 
£2,035,000 [$9,893,595] would work out exactly, would it not, as the 
salaries to one date; they would bear the same proportion as the in¬ 
crease in the pension?” 

“Not necessarily.” 

“Why not?” 

“If the growth were continuous, it would be so, would it not?” 
interposed the chairman. “It depends upon whether the growth 
is continuous, the £2,035,000 [$9,893,595] now charged may be said 
to have reference to an average charge of an effective vote of fifteen 
years ago. The £1,600,000 [$7,781,534], of 1889 might have had 
reference to an effective charge of fifteen or twenty years before that; 
but if the growth during these periods had been continuous, and could 
be looked forward to being continuous in the future, so the pension 
charge would increase in proportion, would increase with the vote; 
it all depends upon the continuity of it?” 

“It all depends upon the continuity of it.” 

“But also upon those changes which are constantly happening in 
the departments?” queried Sir Ralph Knox. 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


151 


“Also upon the increase of departments. That would vitiate the 
calculation of a normal charge. Supposing the numbers remained 
constant over a series of years,-you could get a normal charge.” 

“And the rates of pay continued constant?” 

“And if the rates of pay continued constant, you could get the 
normal charge. Then I think your comparison would be possible if 
there were no growth of salaries or numbers.” (°) 

This point seemed finally to have been made plain. 

Through the questioning of Sir Ralph Knox the mistake made 
by Sir Herbert Maxwell and others at the time of the Ridley Commis¬ 
sion’s inquiry in supposing that the percentage of salary that would 
have to be deducted to create a superannuation fund that would pay 
the necessary benefits was the same as the average between the non- 
effective and effective votes, 12 to 20 per cent at the time of the 
calculation of 1869, was also made apparent. The fallacy of this 
view is well brought out in the testimony, and it was evidently 
fresh in the minds of the commissioners when the members of the 
Deferred Pay Committee came before them three days later to present 
their case. 

Said Sir Ralph Knox to Mr. Heath, 

“It has been stated now by you that in a certain class of depart¬ 
ments the pension charge amounts to as much as 29 per cent, in 
another to 32 per cent, in another 4 per cent, in another 5 per cent, 
and in another 14 per cent, I think?” 

“Yes.” 

“And it has been stated elsewhere that such a percentage repre¬ 
sented the addition that would have to be made to the salaries of the 
various departments in order to provide a fund for pensions. It has 
been stated, I think, before the last commission, that a calculated 
figure of 18 per cent gave the amount which would have to be added 
to the pay of everybody in order to give them the equivalent of 
the pensions ?” 

“I do not think that there is any necessary connection between 
the two things.” * * * 

“In fact, as the amount of the pension charge at the present day 
represents the pensions on establishments of 20 or 30 years ago, 
they cannot have necessarily any connection?” 

“No.” 

“And your view would be that, supposing you wanted to ascertain 
what should be added or deducted from the pay of the various officers 
of the departments in order to provide the pensions, you would have to 
discount, as I should say, that charge. That is to say, you would 
calculate the present value of the deferred pension in order to pro¬ 
vide the subsequent pension charge?” 

“Yes * * * it would mean an actuarial calculation.” 

“An actuarial calculation of the sum of money or the annuity to 
be paid or added to the pay of everybody in order to provide the 
deferred annuity at the termination of the man’s service?” 

a Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
evidence, p. 8. 




152 


CIVIL-SEEVICE EETIEEMENT IN GEEAT BEITAIN. 


“Yes” 

“ And the idea which has got into many people’s heads that there 
is a direct connection between the present charge for pension and the 
present charge for pay is, at all events to those who have given any 
consideration to the thing, an exploded idea?” 

“ Yes.”( a ) 

The confusion caused in the minds of many by the testimony 
which Sir Reginald Welby had given before the Ridley Commission 
about the actuarial calculation made in 1869 as regards a normal 
establishment was cited. Said Sir Ralph: 

“What Lord Welby roughly calculated was that certain salaries 
would produce, supposing the thing were constant, a certain constant 
charge for pensions?” 

“Yes.” 

“But the converse, or the reverse, is what I am driving at. What 
we want to know is what addition to a man’s pay or deduction from 
a man’s pay would produce the normal charge for pensioning him. 
That would be it, would it not?” 

“Yes, I am not aware of any actuarial calculation having been 
made to determine that point.” 

“At all events, the notion that was given utterance to in the recent 
commission is no longer accepted by the Treasury?” 

“Exactly.” («) 

The views of the Deferred Pay Committee were presented to the 
commission by two representatives of the London committee, Mr. 
Charles R. Moir, a chief examiner, and Mr. Herbert Rolfe, a clerk in 
the War Office, and by two representatives of provincial committees, 
Mr. H. Ellis, Collector of Customs at Manchester, and Mr. H. F. Dol- 
lond West, Collector of Inland Revenue at Hull. 

They stated that the main point they wished to emphasize was 
that “pensions in the civil service are really deferred pay.” Their 
understanding was that from 16 to 20 per cent of their salaries was 
being withheld to pay pensions. They said they wanted the com¬ 
mission to find out what the real basis of deductions was and then 
make some rearrangement of the system that would be more equita¬ 
ble to different classes of the service. Considering that pensions were 
paid out of theoretical deductions from the salaries of all the civil 
servants, they held it inequitable that only those civil servants who 
reached the pensionable age received any benefit from those deduc¬ 
tions. They thought that the amounts deducted from salary should 
be put into a fund and these amounts, with whatever interest they had 
earned, returned to the contributor or his representatives on his 
separation from the service. They held especially that widows and 
orphans of those who died in harness should have a claim on the de¬ 
ferred pay of their deceased relatives. If the imaginary deductions 

a Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
evidence, p. 9. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 153 

were more than sufficient to pay the pensions—and they thought 16 
to 20 per cent of salaries would be—then they believed the difference 
should go into an insurance fund for the benefit of their dependents. 
If those deductions were not sufficient for the grant of both pension 
and insurance then they held that the system should be so revised, 
even if it did cost a little more, as to make that possible. 

Asked by the chairman of the commission what he meant by saying 
that pensions are deferred pay, Mr. Moir said: 

We understand that pensions are not mere addenda, charitable 
contributions, or anything of that kind, added by the Government, 
but that in fixing salaries and scales of pay the Government has in 
all cases made some pretty definite deduction from what we might call 
the market rate, and, having made that deduction, it is really equiva¬ 
lent to the Government having given the larger or full market rate 
of salary, and having asked the civil servant himself to contribute 
the amount of the deduction. That amount then represents pay 
deferred. 

In every case when the Government takes on temporary servants 
and puts them on the establishment they make a reduction in the 
rates of pay, because a person going on the establishment will ulti¬ 
mately be entitled to a pension. For instance, in the War Office, it 
occurred that certain draughtsmen were brought on from what was 
then known as the temporary establishment to the permanent estab¬ 
lishment. It occurs also in all the dockyards, when the workmen, 
who are temporary and non-pensionable, are brought on the estab¬ 
lishment. In every case the deduction is made. In the Post-Office, 
also, whenever they bring on from the temporary to the established 
service, they make a deduction. These are general illustrations of 
what takes place regularly in the civil service. As you are aware, 
sir, there are two classes, what are called temporary or unestablished 
civil servants and established civil servants. The temporary civil 
servant presumably gets the full market rate of wages or pay for the 
work he does. The established civil servant does not get it, and so 
when there is a transposition from the one class to the other, a de¬ 
duction is made—a definite, absolute deduction—because of the pros¬ 
pective pension that comes to the man if he lives to a certain age. ( a ) 

Arguing that if deductions were generally made, then the system 
operated unfavorably in the case of those civil servants who did not 
live to gain a pension, Mr. Rolfe said: 

I am afraid when the present pension act was passed the whole 
subject of a pension system was not fully considered. That is our 
own impression, and it was considered sufficient at that time to pro¬ 
vide a pension for the persons * * * who remained in the serv¬ 

ice of the Crown for the ordinary period of 40 years, but the desira¬ 
bility of providing for those who dropped out of service before the 
natural termination of their service was not considered. ( b ) 

a Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
evidence, p. 12. 

bldem, p. 13. 



154 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


In further explanation of their contention that the existing system 
was really “a system of chance” and full of inequities, Mr. Moir said: 

It works badly, in this way, that the man who does not live to gain 
a pension gains nothing from the proportion which has been deducted, 
assuming a deduction from his actual pay. One man, for instance—- 
and we could give you many cases—may live to serve the Crown for 
40 years, and be just about to draw a pension, and may die and get 
nothing. Another man may have served the Crown for the same or 
for a longer or shorter period; he may not have served the Crown so 
well, and yet he may live for 20 years to draw a pension. We think 
that any system which allows such an inequality in its operation is 
not satisfactory. ( a ) 

To this Mr. Rolfe added: 

Of course, we can bring any number of specific instances, if they 
are desired, to illustrate this. For instance, we could give an instance 
of a man who previously served the Government in an unestablished 
capacity at a salary of £365 ($1,776.27) a year, and who was put 
upon the establishment at a salary of £300 ($1,459.95), and who lived 
for five years and then deceased, and who consequently lost about 
£60 ($291.99) a year for a period of five years.( a ) 

On the chairman’s contending that, if the representatives of men 
dying in active service should receive the deferred pay which had been 
deducted from the civil servant’s salaries an additional charge would 
be made on the State, Mr. Ellis said: 

Well, then, even granting that, sir, as I said just now, that does not 
get'rid—putting the case from our point of view—that does not get 
get rid of the inherent injustice of the present system. The way you 
put it is this—that if a man dies on active service, and his money is 
not returned to his widow, the money goes to swell or to maintain 
the pensions of his more fortunate colleagues who live beyond the 
pensionable age. * * * That does seem to us to be a gross 

injustice. ( 6 ) 

At another hearing when Sir Kalph Knox, a member of the Com¬ 
mission, reminded Mr. Moir that “only the same charge is to be 
incurred,” whatever the revision, Mr. Moir replied: 

I may say, sir, we came to this commission with a view of trying to 
persuade them that the civil servants were entitled to something more 
because of the method upon which the Treasury have framed the scale 
of salaries on the basis of deduction of something like 16 to 20 per cent. 
Of course, if that is ruled entirely out of the terms of reference, we 
find the position is a little more difficult. We can not, of course, press 
that aspect of the question too much; still, we would like to ask the 
commissioners to consider it, with a view of making some report in 
this way, that although it may be very satisfactory for the Govern¬ 
ment to revise the pension system without costing anything, it would 
be very much more favorable from the civil servants’ point of view 
that it should be revised, even though it did cost a little, sir. 

a Report of Commission on Superannuation in the Civil Service, 1903. Minutes of 
evidence, p. 14. 

&Idem, p. 43. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 155 

Mr. Rolfe. And not only desirable, but equitable, sir. 

Mr. Morn. Quite fair. 

Mr. Rolfe. We base our claim for a reconsideration of the pension 
system to a large extent, upon the inequality of the present system. ( a ) 

Request of Civil Servants that Theoretical Contributions 

be Funded. 

The specific request of the deferred pay committee, as voiced by 
Mr. Rolfe, was that the pension system for the government employees 
should be “put upon a definite footing similar to schemes * * * 

which exist outside.’’ They held that the existing pension system 
was “archaic,” “old-fashioned,” and less desirable than super¬ 
annuation schemes developed since the adoption of the government 
system in 1859, by organizations like the Bank of England, the Lon¬ 
don and Northwestern Railway, the Cunard Steamship Company, 
and the Liverpool and the Manchester corporations. The charac¬ 
teristic features of all these superannuation schemes, as distinguished 
from the Government’s pension system, was that they had a super¬ 
annuation fund made up of contributions from the salaries of the 
employees and contributions from the employing body. The following 
quotations from the testimony of Messrs. Moir and Rolfe showed the 
reasons advanced by the civil servants for desiring that their theo¬ 
retical deductions be funded in similar manner: 

The whole system hitherto has been so vague, we think it would be 
very desirable to get it on a definite footing. A fund such as we 
contemplate would have that advantage, because, practically, a per¬ 
sonal account would be kept of every man’s own position in relation 
to the fund. * * * All these funds that we know anything of 

have got definite statements and definite accounts with their em¬ 
ployees; an employee knows at any moment what his own title is 
exactly—how he personally stands. * * * Then, again, sir, 

the creation of an actual fund would have the advantage which these 
funds we have referred to have, that from time to time the possi¬ 
bilities of the fund might be reviewed. * * * It appears in their 

cases that they are able, as they value and examine their funds, to 
increase the benefits they can give. * * * Our chief view of the 

advantage of a fund is based on the existing funds of the railways, 
and so on. They seem to us to be very satisfactory to the recipients 
as a rule, and it was mainly on that ground we thought it would be 
desirable that the Government should also establish an actual fund.( b ) 

The desire of the civil servants that the Government should put 
their imaginary deductions into a fund which should be invested for 
their benefit undoubtedly had its origin in the feeling that it was 
unjust for this “deferred pay” to be withheld from their dependents 
in case of their not living to receive themselves the pension their con¬ 
tributions would have earned. They thought that widows and 

a Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
evidence, p. 17. 

&Idem, p. 16. 






156 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


orphans would have a claim that could not be denied on a fund to 
which the deceased civil servant had been a recognized contributor, 
the amount of his contributions and the accrued interest being defi¬ 
nitely known and a matter of record. Mr. Moir stated that the most 
important thing that they wanted to guard against, in addition to 
destitution in old age, was “ death during service’’ or “ the leaving of 
widows and orphans.” It was pointed out that one of the causes 
which led originally to the pension system was the fact that “the 
public would hear with very great regret of civil servants being desti¬ 
tute in their old age” and that “the Government should extend that 
feeling to the widows and orphans of all servants who die by the way.” 

Request of Civil Servants for Insurance out of Surplus 
Theoretical Contributions. 

It was assumed by the representatives of the Deferred Pay Com¬ 
mittee that the amount which they believed to be deducted from their 
salaries was more than sufficient for the payment of pensions. There is, 
of course, no mathematical difficulty in calculating a proper deduction 
from a monthly salary or other salary that will create a fund only 
sufficient to pay a deferred annuity to the survivors. From an insur¬ 
ance point of view, the forfeiture of premiums by those who die pre¬ 
maturely is not inequitable, since the premium paid contemplates 
that forfeiture. Nevertheless, the assumption of the employees 
shows most conclusively the impracticability of any arrangement, in 
a general superannuation scheme, which carries with it a forfeiture by 
an employee. Their assumption was perfectly reasonable, too, in view 
of their belief that that deduction amounted to from 16 to 20 per cent 
of salaries. They knew that many of the superannuation funds main¬ 
tained by railway systems were financed on a deduction of 2£ per cent 
from salaries and 2 J per cent from the employing body, making a total 
of only 5 per cent against the reputed deduction of 16 to 20 per cent 
by the Government. It was not strange that they should think, 
allowing even for the more limited pensions of the industrial schemes, 
that the difference between the amount presumably deducted by the 
Government and the amount presumably necessary should be suffi¬ 
cient to give them the additional insurance benefit. 

“You want a sum at death and a sum on retiring from the service. 
Well, now, can you expect that in addition to what we have already 
given?” asked Mr. Bunn, a member of the commission. 

“ Yes, we do,” was the answer, “the ground of our claim being that 
the Government have calculated the pension to be worth more than it 
really is, and have fixed the salaries accordingly, and in readjusting 
that, we want them to readjust it so as to provide funds for widows 
and orphans. ”(°) 

a Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
evidence, p. 25. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


157 


After the review of first principles which the commissioners had had, 
a few days before, with Mr. Heath, of the Treasury, they were, of 
course, not inclined to accept without question the assumption of the 
Deferred Pay Committee that from 16 to 20 per cent of the civil serv¬ 
ants’ salaries was withheld in order to maintain the pension system. 
They remembered that Mr. Heath had said he knew of no actuarial 
calculation having been made to determine “ what addition to a man’s 
pay or deduction from a man’s pay would produce the normal charge 
for pensioning him.” 

“Do you think you can prove, as a matter of history, that there has 
been a deduction of that kind contemplated?” said the chairman of 
the commission to the representative of the Deferred Pay Committee. 

“Yes,” answered Mr. Moir. “We rely largely upon the evidence 
given before the Royal Commission on Civil Establishments in 1886 
* * * by representatives from the Treasury, Sir Francis Mo watt 

and Lord Welby. * * * Sir Francis Mowatt said, for instance, 

that when they gave a man £100 [$486.65] a year they practically 
considered a charge of £118 [$574.25] a year was being undertaken. 
That, as far as the taxpayer is concerned, so to speak, it was really 
a charge of £118 [$574.25] a year.” 

“Can you tell us what that is founded on?” asked the chairman. 

“That is our difficulty sir,” returned Mr. Moir. “Throughout the 
Ridley Commission we find statements of that kind, varying in places 
from time to time, and with different speakers, but, as far as we can 
gather, the Treasury mind is that there is some deduction or that the 
proportionate value of the pension is 16 to 20 per cent. The state¬ 
ments varied in different places, but as far as we can get them together 
they form somewhat of a general statement to that effect. Undoubt¬ 
edly the Treasury mind was apparently a little vague as to the exact 
proportion.” 

“You can not suggest upon what basis those figures are given?” 

“We are not in an absolute position to say that,” said Mr. Rolfe, 
“but we are in a position to say that Lord Welby stated that he had 
had a calculation made, and that his statement as to the proportion of 
deferred pay to actual salary was based upon that calculation. Of 
course we are not aware of the details of that. 

“There is also a Treasury letter,” added Mr. Moir, “written on 
the 1st of July, 1891, to the Board of Trade, where this passage 
occurred. * * * ‘ The conversion of temporary into permanent 
appointments, without any alteration of salary, involves an addition 
of 15 to 20 per cent to the charge.’ ” * * * 

“You have no knowledge on what that is founded? 

“No, no actual knowledge.” 

“Have you any opinion yourself upon that? 

“Well, my impression, sir, for what it is worth, is that it is founded 
on the relation between noneffective and effective charges for the 
year. 

“You think that it is a just method? 

“No, I do not, but if the Treasury have allowed it to operate, I 
think we are entitled to rely upon the fact that that is what has been 
actually taking place. 


158 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

“What do you mean by the Treasury having allowed it to operate? 

“Well, if in fixing any scale of salaries they have considered that 
the noneffective charge or part of the charge was 15 or 20 per cent, 
they have no doubt reduced the market rate of pay given to any 
particular class by that amount.” ( a ) 

The point of this is that Mr. Moir at least, and presumably other 
civil servants, too, had perceived the confusion of ideas which had 
arisen as a result of testimony before the Ridley Commission in 
regard to pension charges and the amount of deductions required for 
maintaining a fund, but thought that, whatever the basis on which 
the Treasury made deductions, the fact that they made them, regard¬ 
less of the percentage of deduction or the scientific or unscientific 
basis for such deductions, was sufficient to justify the theory of 
pensions as deferred pay and the demand of the clerks for a more 
equitable distribution of the contributions. Said he: 

WTiat I meant was that even though the Treasury may have acted 
on a wrong basis, it does not follow that the civil servant should 
suffer because of that. It is not for us to justify the ground on which 
the Treasury or whoever fixed the rates of pay may have arrived 
at the proportion. What I mean, if I can make myself quite clear, 
is this: that it is quite possible that the relation between the non- 
effective and the effective charges does not bear the same proportion 
as the value of the deferment, as we call it, does to the pay of any 
individual civil servant. For instance, we are advised by our actuary 
that in a few years, say ten or more years, the relation or proportion 
between the noneffective and the effective charges will probably rise 
to something like 25 per cent, whilst at the time the Treasury were 
dealing with these matters the relation was something like 16 to 20 
per cent, so that the proportion may be a varying amount, but the 
value of a civil servant’s pension bears a constant relation to his 
pay.( * * 6 ) 

Discussing the matter in detail, the representative of the Deferred 
Pay Committee and the chairman of the commission agreed that in 
calculating the pension charge it was important that the element of 
interest should not be forgotten and that the actual deduction would 
probably be much less than the ratio of the noneffective to the effective 
vote. How much less would depend on the rate of interest. 

The Fact of Postponed Charge Established but Amount not 

Determined. 

Sir Francis Mo watt, the permanent administrative Secretary to 
the Treasury—formerly Mr. Mowatt—was later called before the 
commission and questioned as to what he had meant in 1888 when he 
told the Ridley Commission that the real charge that the State had 
to undertake for a civil servant on £100 ($486.65) a year salary was 

“ Report of Commission on Superannuation in the Civil Service. 1903, Minutes of 

evidence, p. 12. 

& Idem, p. 13. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 159 

£118 ($574.25) a year. “That has no reference to deduction/ 7 
said he. “I meant no more than this: That the pension charge of 
an officer might be taken roughly at 16 to 18 per cent in addition 
to his salary. 77 While it seems clear that he was thinking not of 
individual charges but of the charge of the whole service, grouping all 
cases together, since all individuals do not live to pensionable age, 
it is equally plain that his statement was a little misleading. It is 
not strange that the civil servants generally should have thought 
they had high authority for the contention that about 18 per cent of 
their salaries was being held back by the Treasury. 

The origin and fallacy of the theory of a 16 to 20 per cent deduc¬ 
tion was thus abundantly shown and admitted, but the theory of 
pensions being deferred pay remained substantially unshaken, 
although Sir Francis Mowatt declared that he had never heard of a 
public servant being reduced in salary on being transferred from a 
nonestablished to an established post. Members of the Deferred 
Pay Committee had told the commission that such was the common 
practice. When given the facts in a definite case, which had been 
cited to the commissioner, Sir Francis Mowatt said: 

I could not answer without looking fully into the case, but I should 
say that under no circumstances would a man without some express 
explanation suffer a reduction of 15 per cent on being transferred 
from a nonestablished to an established post.( a ) 

Mr. Heath, also an official of the Treasury, admitted, however, 
that deductions of about 5 per cent of salary were made on trans¬ 
ferring workmen from the unestablished to the established service. 
Mr. Morton, a member of the commission, said to him: 

“You were talking just now of two different classes of laborers in 
dock yards. You gave us an instance some time ago. It is well 
known that there are hired laborers and established laborers, and 
we are aware that the hired laborers receive a higher rate of pay 
than the established laborers. 77 

“Yes, 77 answered Mr. Heath, “the difference being that the estab¬ 
lished laborer receives about 5 per cent less. 77 

“Yes, in point of fact, that is a species of contribution that he 
makes toward his future pension? 77 

“No, I should not put it that way. 77 

“I should be glad to hear what your view is. 77 

“It might be regarded as a contribution toward the cost of giving 
him pension rights, but of course it is not put aside; it is not accu¬ 
mulated. It has no relation to a system under which a fund is 
established? 77 

“Oh no, I am quite aware of that. It is a small contribution 
toward the cost of making a man pensionable.” 

“He receives less pay in consideration of pension, in point of fact?” 

“It is by way of a set-off against the pension charge. 77 ( b ) 

a Report of Commission on Superannuation in the Civil Service. 1903. Minutes 
of evidence, p. 153. 

b Idem, p. 9. 




160 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

Request of Civil Servants that Amount of Postponed Charge 
be Determined. 

The members of the commission, and representatives of the civil 
service having agreed that there was a deduction from salary but 
that it was less than 16 to 20 per cent, Mr. Rolfe defined the position 
of the civil servants thus: 

We should like it to be established in the first instance, if possible, 
what is the actual deduction, if such deductions exist, which the civil 
servants at present suffer, and we feel that the Treasury only is in a 
position to have the necessary calculations made to establish that 
fact, if that fact can be established. It would then be seen whether 
the deductions at present made are sufficient in themselves to form a 
superannuation fund which would give benefits to survivors, and 
also to those who decease prematurely, but until that is definitely 
ascertained the position of the civil servant is that the deduction at 

E resent suffered is sufficient to provide the benefits for which we ask 
y the formation of a superannuation fund. (°) 

The chairman argued that the result of making payments to those 
who do not now receive payments, namely, widows and orphans, 
must mean smaller payments to pensioners unless the total pay to 
the civil servant was increased. The civil servants argued, on the 
other hand, that something additional would be available, if the 
funds were set aside, bearing interest. Pressed for an answer whether 
the civil service was prepared to take less payment to the pensioner, 
Mr. Moir said that he thought a reduction of pensions, if combined 
with insurance benefits, would probably be acceptable to them. 
Mr. Ellis also held that a small diminution of pension would be 
accepted by the service to insure provision for dependent relatives. 

The sessions between the commissioners and the representatives 
of the civil service resulted, therefore, in a helpful clarification of 
ideas. It seemed to be conceded, on the one hand, that there was 
reason for thinking that pensions were, to some extent at least, 
deferments of pay and it was admitted, on the other hand, that there 
was no sound basis for the contention that the amounts deferred 
were as much as 16 to 20 per cent of salary. The civil servants’ 
representatives admitted reluctantly, also, that if it was impossible 
to increase the total charge, the only way to secure the insurance 
benefits desired might be by reduction of pensions. They hoped, 
however, that the creation and investment of a fund might obviate 
that necessity. 

The actuary whom the Deferred Pay Committee had consulted, 
Mr. Philip Lewin Newman, was later called before the commission 
and his testimony served to emphasize this clarification of ideas. 
He stated that they had wished to have certain benefits upon death 

° Report of Commission on Superannuation in the Civil Service. 1903. Minutes 
of evidence, p. 14. 






CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 161 

before superannuation or upon death after superannuation, but 
before the amounts assumed to be paid in contribution would equal 
the pension paid in addition to the present pension, and that he had 
estimated for them what the additional cost would be for providing 
benefits on death before superannuation. He did not take into 
consideration that the charge was to remain the same and said that, 
if that had been a condition of his investigation, the only way in 
which he could have given them any plan by which they could secure 
payment on death before superannuation would have been by reduc¬ 
ing the pensions or by requiring them to make a contribution. Such 
benefits could be secured only at the cost of the superannuation 
allowance or the cost of some contribution from the civil servant, 
such as a revision of the scale of salary; in other words, by either 
reduced pension or reduced pay. On being asked if he had advised 
the Deferred Pay Committee that they could get greater benefits by 
the institution of a pension fund instead of the maintenance of the 
existing system which charged the actual cost of the pensions each 
year to the annual estimates, he explained that he had done so, but 
only on the assumption urged by them that they were already suffer¬ 
ing a deduction from their salaries of a larger amount than was neces¬ 
sary to give them the pension provided. Having no data to go on, 
he said he had not been in a position to decide on the truth of their 
assumption. 

Voluntary Insurance Organizations Maintained by Civil 

Servants. 

Evidence given the commission by members of the civil service 
regarding the voluntary insurance organizations maintained by them 
to provide against that calamity most dreaded by them—“death 
during service”—showed that there was a commendably high aver¬ 
age of foresight and prudence in the service. They found that the 
largest of these organizations was the Civil Service Insurance Society. 
This society, which was then about twelve years old, was enabled by 
a special arrangement with an insurance company to effect insurance 
for civil servants on very favorable terms, the premiums being de¬ 
ducted quarterly from the salaries of the policy holders. They found 
that over 20,000 policies had been taken out for an aggregate sum 
assured of over £5,000,000 ($24,332,500). The Civil Service In¬ 
surance Society also deals in annuities both immediate and deferred, 
and it had recently established in connection with its general business 
a widows’ and orphans’ annuity fund. The commission heard evi¬ 
dence also in regard to two old-established and prosperous depart¬ 
mental organizations known as the Customs Annuity and Benevo¬ 
lent Fund and the Inland Revenue Benevolent Fund. They found 
that the former was mainly a life assurance society and that the latter 
35885—S. Doc. 290, 61-2-11* 


162 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

undertook the provision of widows’ annuities in return for the sur¬ 
render of bonuses on policies of insurance. They found two similar 
organizations in the Postmen’s Mutual Benefit Society and the Post- 
Office Insurance Society. The former had a membership of about 
12,000 and provided a benefit averaging £25 ($121.66) which was 
payable on death or on retirement by reason of ill health, and, in 
some cases, on dismissal or on voluntary resignation of employment. 
To the Post-Office Insurance Society all grades of the established 
postal service are eligible for membership. The members numbered 
then about 20,000 and the amount of the benefit varied from £50 to 
£100 ($243.33 to $486.65). A similar institution had been in ex¬ 
istence for fourteen years among the Board of Trade surveyors under 
the name of the Board of Trade Surveyors’ Mutual Trust. During 
that time the total sum paid out was nearly £5,000 ($24,332.50), or 
an average benefit of about £165 ($802.97). Another institution that 
the commission found very meritorious was the Civil Service Benevo¬ 
lent Fund, which had been established in 1885, was supported by the 
voluntary subscriptions and donations of civil servants, and applied 
itself to relieving the necessities of the widows and orphans of those 
who died either in the service or shortly after retiring on pension. 
The annual income from subscription was about £1,600 ($7,786.40), 
the number of cases dealt with since 1885 numbering nearly 1,200.. 
Though the amount of relief given in individual cases was not large, 
the fund accomplished a very useful work. 

Per Cent of Salaries Paid for Life Insurance by Civil 

Servants. 

An interesting statement was made by the commission in their 
report showing the per cent of salaries devoted to insurance by the 
clerks of various grades: 

In some respects, the considerations which affect the civil servants 
whose salaries exceed £160 ($779), and who may be distinguished 
as the income tax-paying body of the service, are not precisely the 
same as those which affect the wage-earning body. We "have 
obtained, by the courtesy of the heads of departments, a return 
showing that the total number of officers receiving a salary above 
£160 ($779) is 14,754, of whom (a) 11,827 or 80 per cent have sala¬ 
ries not exceeding £400 ($1,947); (b) 1,075, or 7J per cent have 
salaries exceeding £400 ($1,947) and not exceeding £500 ($2,433); 
(c) 1,104 or 7i per cent have salaries exceeding £500 ($2,433) and 
not exceeding £700 ($3,407), and (d) 748 or 5 per cent have salaries 
exceeding £700 ($3,407). Of the (a) class 26 per cent, of the (b) 22 
per cent, of the (c) 27 per cent, and of the (d) 34 per cent do not 
claim any deduction of income-tax in respect of insurance premiums. 
The remainder in the (a) class pay in premiums on the average 4.6 
per cent of their salaries, the (b) 5.5 per cent, the (c) 5.9 per cent; 
and the (d) 6.9 per cent. In other words, each member of the (a) 
class, on an average salary of £247 ($1,202), pays away £11 6s. 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


163 


($54.99) a year in life assurance premiums; the (b) class, on an 
average salary of £436 ($2,122), pays away £25 4s. ($122.64); the 
(c) class, out of £597 ($2,905) pays away £35 2s. ($170.81); and 
the (d) class, on an average salary of £950 ($4,623), pays away 
£65 10s. ($318.76). From this it results that the larger a man’s 
salary is, the more, not only in actual money, but also in proportion 
to his salary, he devotes to life insurance. The general average for 
the whole 14,754 officers is that 3,842, or 26 per cent, do not claim 
any return of income-tax in respect of insurance, and that the remain¬ 
der, on an average salary of £321 £$1,562), pay away £16 12s. ($80.78) 
each, or 5.2 per cent, in premiums. No similar statistics are obtain¬ 
able with regard to civil servants having an income not exceeding 
£160 ($779).>) 

The return on which the foregoing statement was based is as 
follows: ( b ) 

SUMMARY OF A RETURN FOR THE FINANCIAL YEAR ENDING MARCH 31, 1902, FROM 
THE SEVERAL DEPARTMENTS AS TO THE INSURANCE OF OFFICERS ON THE 
ESTABLISHMENT RECEIVING SALARIES EXCEEDING £1G0 ($778.64) AND CLAIMING 
REDUCTIONS OF INCOME TAX FROM THEIR DEPARTMENTS IN RESPECT OF THEIR 
INSURANCE PREMIUMS. 


Classified salaries. 

Officers 

receiving 

salaries. 

Amount of 
salaries 
received. 

Officers 
not claim¬ 
ing re¬ 
duction. 

Officers 

claiming 

reduc¬ 

tion. 

# 

Amount of 
salaries re¬ 
ceived by 
officers 
claiming 
reduction. 

Amount 
of insur¬ 
ance 

premiums 

paid. 

$3,406.55 and over. 

$2,919.90 and under $3,406.55. 

$2,433.25 and under $2,919.90. 

$1,946.60 and under $2,433.25. 

$778.64 and under $1,946.60. 

Total. 

748 

410 

694 

1,075 

11,827 

$3,530,724 
1,313,089 
1,888,460 
2,371,299 
14,040,870 

256 

112 

188 

232 

3,054 

486 

296 

504 

835 

8,682 

$2,248,080 
943,940 
1,382,130 
1,869,364 
10,440,414 

$155,071 
55,230 
81,285 
102,518 
479,053 

a 14, 754 

23,144,442 j 3,842 

10,803 

16,883,928 

873,157 


a Including 109 officers with regard to whom no official information was available as to whether they 
claimed reduction or not. 


Testimony of Commission’s Actuary, Showing Necessity of 
Provision for Refund of Contributions. 

The last witness called by the commission was Mr. Henry W. 
Manly, actuary and secretary of the Equitable Life Assurance 
Society of London and ex-president of the Institute of Actuaries. 
As Mr. Manly had only a short time before published a paper on the 
“Valuation of staff pension funds” which had drawn particular at¬ 
tention to his skill in handling problems connected with such funds 
the commission called on him for assistance. The problem they set 
before him was a very definite one—to tell them “what advantages 
could be conferred in exchange for the reduction of a quarter of a 
pension.” They stated that there was objection to the existing 
system on the ground that it provided benefits for those who sur¬ 
vived, while those who died in the service, or their representatives, 
received no benefits under it—a fact he had commented upon in his 
paper—and they had reason to believe from what witnesses had said 

a Report of Commission on Superannuation in the Civil Service. 1903. Report, 
pp. viii and ix. 

&Idem., Appendix, p. 218. 
























164 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


that the pension might be reduced by a quarter without diminishing 
the hold that the system had over the servants, or the power of 
dismissing them, or even the attractiveness of the service. They asked 
for no general criticism of the existing system, but wanted to know 
how it could be modified, in the suggested way, so as to be actuarially 
sound and at the same time be no additional tax on the country. 

In the course of his testimony Mr. Manly was asked if he had any 
knowledge of similar organizations of pension funds that could 
throw light upon the commission’s* labors. He replied that he had 
knowledge of a great many pension funds, but they were all more or 
less different from the government scale. He went on to make 
some remarks about the characteristic features of prevailing funds 
that show well why it was not strange that so many civil servants of 
England were dissatisfied with the existing pension system. Said he: 

Where there are funds and the men contribute a portion to those 
funds they always endeavor to get certain rules in by which they 
will get their money back somehow. * * * Or some portion of 

it, and although that diminishes—sometimes very largely dimin¬ 
ishes—the retiring allowance, they do not seem to mind that so much 
as the getting their money back. For instance, it is a very common 
rule now that if a man withdraws, resigns, or is dismissed from the 
service, he shall have his own contributions back. That diminishes 
the power of the fund to give pensions at the end. * * * (The 

added sum from the employer) he does not get back if he withdraws, 
resigns, or is dismissed. * * * If he dies in the service—this is 

a very common rule—if he dies in the service his relatives shall 
receive what he has contributed, and what the firm has contributed. 
Sometimes they try to get in compound interest as well. * * * Now, 
the trouble with these funds is the desire of the members, the con¬ 
tributors, at any rate, to get their money back with interest if they 
can. And they are getting now very generally in these funds a con¬ 
dition that if after attaining the pensionable age, after entering upon 
the pension, the amounts which they receive in pension do not amount 
to their contributions, that the difference shall be paid to the rela¬ 
tives, all of which, of course—all these additional benefits—reduce 
the pension which they are able to get when they retire. ( a ) 

Asked if old age annuities were increasing, Mr. Manly said: 

No; that is what we call deferred annuities; annuities to commence 
at a certain age. * * * There is something very peculiar in that, 

that nobody, or very few people think it is worth while to make pro¬ 
vision for their old age by the way of purchasing old age annuities. 
They would much sooner see their money—and that brings us back 
to the old point. They want to see their money. They will invest 
their money for that purpose, invest it sometimes rather badly, I am 
afraid, but still if they invest their money they know it is there and 
they can leave it, but they do not like sinking as they call it, sink¬ 
ing the money on the chance of getting it back, even in double or 
quadruple sums hereafter. * * * They will provide for every- 

a Report of Commission on Superannuation in the Civil Service. 1903. Minutes 
of evidence, pp. 179 and 180. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


165 


tiling except old age; provide for sickness, provide for strikes, pro¬ 
vide for anything—anything except old age; and—well, the largest 
industrial company, the “Prudential” devised a scheme—an exceed¬ 
ingly good scheme it was—by which for a certain fixed contribution 
of 2d. [4 cents] a week commencing under the age of 20 or so, they 
would provide on death the equivalent of Id. [2 cents] a week, and 
that the other penny should be accumulated to provide an old age 
pension at the age of 65, which worked out very favorably, indeed, I 
think—very well indeed; but the number of those policies which they 
issued was very small compared with the total. Of course, if you 
mention the figure by itself, it looks large, but compared to the 
8,000,000 of policies which they have, it is exceedingly small indeed, 
and I do not think that anything more favorable has ever been 
offered. (°) 

Report of Commission. 

The results of Mr. Manly’s calculations were embodied by the com¬ 
mission in their report and formed the basis of their recommendation. 
That report is the last of the series of important reports made by the 
various commissions appointed in England to inquire into the sub¬ 
ject of granting superannuation allowances to persons in the estab¬ 
lished civil service, and marks a step in the development of the 
English pension system. After noting briefly the conditions under 
which pensions are granted, the commissioners say: 

The simplest and most exact statement of the relations thus 
created between the State and its established servants is that each 
servant is assured of payment of a definite salary or wage during the 
continuity of his service and of provision of a pension for the remain¬ 
der of his life upon his retirement from the service, either upon 
reaching a certain age or through inability, due to medical disquali¬ 
fication or infirmity, to continue at work. But it has been contended 
before us that the pension thus secured, though deferred, is as much 
remuneration for the present services as a salary or wage immediately 
paid, that this salary or wage is less than what would have been paid 
had there been no pension, and that the difference thus deducted from 
the natural or market rate of remuneration is more than is necessary 
to provide for the deferred pension; and upon these premises a claim 
has been urged as of right, to further payments to civil servants and 
their representatives on retirement or death. ( * * 6 ) 

Pensions acknowledged to be deferred pay. 

The first question in dispute, as to whether pensions are deferred 
pay, was answered by the commissioners in the affirmative, but with 
an important qualification. They held that a deferred pension is 
remuneration for services , as much as an immediate money payment, 
but that it is, in part at least, remuneration for continuity of service 
contingently payable on the continuity being maintained during a 
defined period and not accruing from year to year. 


a Report of Commission on Superannuation in the Civil Service 1903. Minutes 

of evidence, p. 180. 

& Idem. Report, p. vi. 



166 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

Theoretical deductions from salary held to be only sufficient for pension. 

The second question in dispute, as to whether the deductions made 
from salaries were more than sufficient, even if a fund were created, 
to provide the pensions, was answered by the commissioners in the 
negative. It will be noted, however, that they failed to prove their 
point by any mathematical demonstration as to the amount required 
for pensions and the amount actually deducted from salaries for that 
purpose. They merely entered a general denial. Said they: 

The allegation that the salary of the civil servant is diminished by 
more than is necessary to provide for his contingent pension is en¬ 
tirely fallacious. It must be remarked that no sum is in fact set 
aside so as to provide for this pension, the pensions being paid as they 
fall due and included as noneffective pay in the yearly estimates sub¬ 
mitted to Parliament so that the State discharges its contractual 
obligations to its servants by appropriations of the precise sums as 
and when they become due. Nor would the condition of things be 
changed if a pension fund were created by setting aside annual 
amounts which, with accumulations, would be adequate to meet the 
ultimate charges. The amounts so set aside would have to be ascer¬ 
tained by strict calculation, so as to be enough to meet these charges, 
and hence they could not be more than sufficient for this purpose, 
unless in making the calculations, discounting the future, we pro¬ 
ceeded upon one rate of interest and then assume a higher rate of 
interest possible during the process of accumulation.^) 

Funding of theoretical contributions held to be not justified. 

Admitting that much might be said in favor of the creation and 
accumulation of a fund as a matter of accounts and as a means for 
charging each year as nearly as possible with the cost of administra¬ 
tion of that year, the commissioners nevertheless held that the estab¬ 
lishment of such a fund would necessitate the creation of a new office 
with new labors and new expenses and could hardly be justified. 
Their conclusion, therefore, was that the remuneration must be con¬ 
sidered as pay plus pension, and as such is offered to and accepted 
by those who enter the service, and “the theoretical contingent addi¬ 
tion to the pay is neither more nor less than the theoretically dis¬ 
counted value of the pension.” 

Recommendation that pensions be reduced one-quarter and difference 
given in insurance and cash. 

While thus arbitrarily denying that a larger per cent of salary was 
deducted than was necessary to pay pensions, the commissioners never¬ 
theless conceded that the terms of service might be modified without 
detriment to the service so as to secure a wider distribution of bene¬ 
fits among all the members of the service, and quoted Mr. Manly as 

° Report of Commission on Superannuation in the Civil Service. 1903. Report, 
pp. vi and vii. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 167 

authority for their recommendation that pensions be reduced from 
one-sixtieth to one-eightieth of salary for each year of service, and 
the amount thus saved be expended for assurance benefits. 

As set forth in the report of the commissioners: 

Mr. Manly based his calculations upon a division of civil servants 
into three classes—wage earners, lower division clerks, and higher 
staff officers, crediting each class with an approximately normal scale 
of pay and increments of pay, and he took as approximately repre¬ 
senting the ratio of numbers in each class the figures 83, 15, and 2. 
He used the Life Office tables known as OM, supplemented by some 
facts of experience in the civil service, and he proceeded upon an 
assumed rate of interest of 3 per cent. 

Upon the data thus described Mr. Manly proceeded ro ascertain 
the value which would be withdrawn from the remuneration of civil 
servants by reduction of one-quarter of their prospective pensions, 
and then went on to calculate the results of various proposals for 
redistributing this withdrawn quarter amongst members of the 
service. His work was directed towards ascertaining in terms of a 
year’s pay, what might be given to the representatives of a civil 
servant dying in the service, or what might be paid in addition to his 
pension to a person retiring, whether on reaching the full limit of his 
possible service or prematurely through incapacity to discharge the 
duties of his position. 

The results communicated to the commission were as follows: 

(1) If the proceeds of this reduction of pension were to be given 
back wholly to the representatives of those who died in the service, 
it would enable the State to give to their representatives nearly two 
years’ pay at the time of death. 

(2) If the proceeds of this reduction of pension were to be shared 
bv those who retired from the service as well as by the representatives 
or those who died in it, one year’s pay could be allowed to those who 
retired through old age and to the representatives of those who died 
and as many fortieths of one year’s pay to those who retired pre¬ 
maturely from ill health as corresponded to their completed years of 
service. 

These benefits will still leave a slight margin of undistributed value 
which would be just exhausted if, in the case of servants retiring pre¬ 
maturely, it was provided that in the event of death before the sum 
allowed at retirement plus pension subsequently received amounted 
to one year’s salary, the deficient balance should be paid to their 
representatives. On the other hand, the margin would be slightly 
overpassed if one year’s pay were given to the retiring servant in 
addition to the pension. ( a ) 

Having considered these two alternatives, the commission recom¬ 
mended the latter, saying: 

We arrive at the following conclusion, that in lieu of the 'present 
system there should be secured pensions on the same conditions, 
except that they should be calculated on the base of one-eightieth 
instead of one-sixtieth for every year of service; plus a year’s pay to 

a Report of Commission on Superannuation in the Civil Service. 1903. Report, 
p. xi. 



168 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

the representatives of the civil servant dying at any time in the 
service, and to a civil servant retiring after 40 years of service; and 
to a civil servant retiring by reason of ill health with less than 40 years' 
service as many fortieths of a year's pay as years he has served, 
coupled with a provision that if he should die before this payment 
and the pension subsequently received amounted to one year’s pay, 
the deficiency should be paid to his representatives. 

The commission recommended further that the new system, if 
adopted, should be extended to all classes of pensionable servants, 
both wage-earning and salaried. They were of opinion that “the 
advantages of a money payment being secured in case of death with¬ 
out the pressure of periodic demands for the payment of premiums 
would be generally appreciated,” especially by the wage-earners, and 
thought that “the risk that the habit of prudence would be endan¬ 
gered by such a provision would not be realized in practice.” Said 
they: 

We attach great weight to the principle of similarity of treatment of 
all classes of pensionable servants so that all may feel that they are 
working under a common system, and that in the not unknown cases 
of a servant passing from one class into another no embarrassment 
may arise from the fact that his vested interests are undergoing a 
change which must be taken into account. ( a ) 

Minority report of commission adverse to any change. 

The Courtney Commission was not unanimous in its findings. Two 
of its commissioners, Sir Ralph H. Knox and Mr. E. W. Brabrook, 
dissented from the views of their colleagues, and presented a minority 
report. They held that it was impossible, without increasing the 
burden of the taxpayer, to confer on civil servants greater and more 
uniform advantages than those granted by the existing system. 
They did not consider the plan recommended by the majority of the 
commission as more advantageous or more uniform than the existing 
one. They thought it wise, therefore, to let well enough alone. Said 
they: 

What is called a pension in the civil service is merely the con¬ 
tinuance, during the later years of life, of pay promised for a whole 
life service, during a period when services, if rendered, would prob¬ 
ably be useless, and, in many cases, worse than useless. The pay¬ 
ments made for the 61st or 66th years of life are no more deferred pay 
than those made for the 60th or 65th. 

This is the present excellent charter of the civil service, and it is 
not only under this system, but because of it that the English civil 
service has earned its high reputation for fidelity, zeal, and inde¬ 
pendence. The advantages of this life provision are given whollv at 
the charge of the State, and in their present form they have attained 

a Report of Commission on Superannuation in the Civil Service. 1903. Report, 
p. xii. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


169 


the objects in view. The same system has been introduced into very 
many establishments of the highest standing in the country, where 
continuous, zealous, and thoroughly honest service are the main 
requirements. ( a ) 

The commissioners who signed the minority report dissented 
particularly from the view of their colleagues that a cash payment 
should be made the representatives of the civil servant in case of 
death; in other words, that life insurance should be furnished him 
out of his pension. They contended that it were better that it be 
furnished out of his pay. Reduced pension or reduced pay were 
clearly the only alternatives. Reduced pension meant a change 
of law; reduced pay meant continuance of the existing system, 
since the great majority of the civil servants were doing that very 
thing, buying insurance for their families and paying for it out of 
their salaries. The argument of the minority was as follows: 

The provision most desired by the great mass of the service is 
the payment in case of death of as large an amount as possible, 
approximating at least to the maximum rate of pay which a clerk 
may reasonably hope to reach, and not a sum governed by the 
creeping salary of the year in which he may prematurely die. 

The best, indeed the only method of obtaining this, is the system 
of life insurance, for which it is far better that the civil servant 
should provide from his pay than from his pension. It needs but a 
little self-denial in the early years of life on the rates of pay now 
current to make some provision, and the Government having sanc¬ 
tioned the deduction of premium from monthly and quarterly 
salaries before the salary is paid, the best security is obtained for 
regularity of payment with the least possible sense of burden on the 
part of the insurer. The scheme now proposed, however, seems to 
offer a premium on improvidence. A man is encouraged to sacrifice 
the provision made for his old age, though but sufficient to maintain 
him in decent comfort, in order that lie may avoid the stress of 
making a present payment, all the prevailing influences towards 
thrift being thus inverted. * * * 

That this view is sound is shown by the remarkable statistics of 
insurance referred to by our colleagues as regards civil servants 
whose incomes are in excess of £160 [$778.64] a year. That it also 
applies largely to men whose income is small is evidenced by the 
numerous insurances effected in the postal service, and also may 
be inferred from excellent movements which have lately been made 
in connection with two great friendly societies for insurances for 
their members up to £200 [$973.30]. * * * 

The scheme of our colleagues disturbs the present excellent system 
in order to substitute a benefit which the vast majority of those 
who require it can and do already provide for themselves, and which 
is of no value to those who do not, because they need not provide it. ( * * 6 ) 

a Report of Commission on Superannuation in the Civil Service. 1903. Report, 

p. xv. 

6 Idem, pp. xvii and xviii. 



170 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


Colloquies which took place between Mr. Manly and the minority 
commissioners at the hearings suggest that the latter may have felt 
that their views would not be questioned by expert authorities. 
Said Mr. Brabrook to Mr. Manly: 

“The existing contract is the compulsory insurance of a deferred 
annuity on nonreturnable premium; and taking off one-fourth of 
that gives an equivalent compulsory endowment insurance of one 
year’s salary?” 

“Yes.” 

“That would apply to all civil servants whether male or female, 
or whether bachelors or otherwise, would not it?” 

“I presume I would make it apply to all.” 

“If it be the fact that from one-fifth to one-third .of the civil 
servants are better otherwise provided for, is not it a little hard to 
make them all accept this compulsory insurance which they do not 
want?” 

“Well—” 

“I have reason to think that the general body of civil servants, 
having salaries above £160 [$778.64] a year, do now insure their lives 
for the benefit of their families to the extent of two or three years’ 
income. Is there any necessity for making compulsory insurance of 
any further sum?” 

“I can not say that there is any necessity for it.” 

“You are giving them by the deferred annuity a benefit which 
they certainly would not insure voluntarily for themselves.” 

“Quite so.” 

“And you are now proposing to deprive them of a portion of that 
benefit for the purpose of being applied to an insurance which they 
do provide for themselves?” 

“Yes; but so far as I understand the question we have before us, it 
has rather been raised by the civil service themselves, has it not?” 

“By a portion of the civil service?” 

“By a portion of the civil service.” 

“And my own impression is that is not shared by the more well- 
informed portion of the service?” 

“I have no knowledge, of course, of that.” ( a ) 

Toward the close of Mr. Manly’s testimony, after he had explained 
the way in which he had made his calculations, Sir Ralph Knox said: 

“The scheme as sketched by you I think is very ingenious, and has 
its attractions. There is a persuasiveness in the direction of trying 
to make a man believe that he is not losing anything. The way in 
which you give ingeniously these sums back, the six years’ purchase 
at 60 years of age, and so forth, makes up his old age pension to him 
at that period, and you try to persuade him therefore, that he is not 
losing anything at all, and I think that is the ingenuity of the scheme, 
bub still the fact is none the less that he does gives up upon his maxi¬ 
mum pay twenty-five per cent of the ultimate pension?” 

“Oh, yes; what he gives up is the equivalent of what you are 
going to pay to the families or the relatives of those who die.” 

a Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
evidence, p. 181. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 171 

“You say you think it would bo attractive, but as compared with 
the system of insurance in which a man in these higher classes can 
secure £300 or £400 [$1,459.95 or $1,946.60] from the time that he 
enters the service by a very small payment at 20 years of age, as com¬ 
pared with that, do you think that this is distinctly an advantage, 
so as to present an attraction?” 

“You must not ask me to say that anything can be substituted 
for life insurance.” 

“I am quite satisfied with that answer.” 

“We say it is the best thing a man can do to insure his life.”( a ) 

Sir Ralph and Mr. Brabrook not only disagreed with their col¬ 
leagues, but predicted that the proposed changes in the law would 
not be acceptable to the members of the civil service. In concluding 
their report they said: 

If the present civil servants who are in good health were given the 
option or accepting these changes, we should be surprised if many of 
them should decide to do so, and we are unable to join in the recom¬ 
mendation of these changes for future entrants, inasmuch as they 
involve a reduction and redistribution of the present pensions which 
to us seem most inexpedient, and would be unequal in their effect. ( 6 ) 

WORKMEN’S COMPENSATION ACT OF 19C6. 

The Workmen’s Compensation Act was passed in 1906. With that 
exception there was no more legislation relating to the pensioning of 
civil servants, after the passage of the Superannuation Act of 1887, 
until the present year (1909). Persons engaged in manual labor and 
other employees whose annual earnings do notexceed £250 ($1,216.63), 
including civil servants, are entitled, under the terms of the Work¬ 
men’s Compensation Act or one of the schemes under and in sub¬ 
stitution of that act, to compensation for injuries suffered in the 
course of their employment. Members of the civil service not en¬ 
titled to compensation for injury under the ordinary law (Workmen’s 
Compensation Act) are pensioned under the old law (the Superannu¬ 
ation Act, 1887), and the Treasury warrant under it. The warrant 
no longer applies to persons entitled to compensation under the 
Workmen’s Compensation Act. 

The employees of the Admiralty and War Office have almost uni¬ 
versally accepted the terms of the Scheme of Compensation (No. 116), 
in case of injury to workmen in government establishments, which 
was established in May, 1903, and revised December, 1907. This is 
accepted by them in lieu of the provisions of the act itself. These 
schemes have to be approved by the Chief Registrar of Friendly Soci¬ 
eties. This particular scheme for workmen in government establish- 

a Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
evidence, p. 185. 

&Jdem, Report, p. xviii. 



172 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

merits was certified by the Chief Registrar of Friendly Societies under 
date of December 16, 1907, as providing scales of compensation not 
less favorable to the workmen and their dependents than the corre¬ 
sponding scales in the Workmen’s Compensation Act, 1906. 

The main features of this scheme are as follows: When a govern¬ 
ment workman dies from injury received in his work his dependents, 
in case they are wholly dependent on him, receive a sum equal to his 
earnings during the three years next preceding the injury, or the sum 
of £150 ($729.98), whichever is the larger, but not exceeding in any 
case £300 ($1,459.95), and half that sum in case they are only par¬ 
tially dependent on him, minus in either case the amounts of weekly 
payments that may have been paid in the interval between the time 
of his injury and the time of his death. If the period of his employ¬ 
ment has been less than three years, the amount of his earnings dur¬ 
ing the three years is deemed to be 156 times his average weekly 
earnings during the period of his actual employment by the Govern¬ 
ment. In any case in which the authorities of a department consider 
that the interests of a workman’s dependents would be better served 
by a pension to the widow or mother (where there is no widow) than 
by a lump sum, the Treasury may deduct a portion for the dependent 
child or children, if any (this portion must not be more than one-half 
of the entire amount if there is only one child or two-thirds if there 
are more than one), and grant a pension to the widow or mother 
equal to the annuity which the remainder of the lump sum would 
purchase, according to the post-office tables for the purchase of 
immediate annuities. On the death of a workman leaving no depend¬ 
ents a payment of not more than £10 ($48.67) is made to cover the 
reasonable expenses of his medical attendance and burial. 

When incapacity for work results from the injury, the injured 
workman receives, for the period he is on the “Hurt List” on account 
of the injury, half his average weekly earnings during the previous 
twelve months or for any less period during which he has been 
employed by the Government. In addition, he receives free treat¬ 
ment in a hospital or free medical attendance at home. If incapac¬ 
ity for work continues beyond the period for which the workman 
receives “hurt pay,” an allowance is paid him. This is twenty-four 
sixtieths of his average weekly earnings during the previous twelve 
months or during any less period of employment in case his capacity 
to contribute to his own support has been totally destroyed, eighteen 
sixtieths when it has been materially impaired, twelve sixtieths when 
it has been impaired, and six sixtieths when it has been but slightly 
impaired. Allowances by way of compensation for injury continue 
only during the continuance of the incapacity, and in cases of doubt 





CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


173 


they are granted in the first instance for a limited period, renewable 
only upon a further medical certificate. ( a ) 

One or two minor departments have introduced regulations com¬ 
pelling their employees to purchase life insurance from some private 
company, but such regulations are applicable only to employees not 
entitled to superannuation privileges. The arrangement is at present 
experimental and only upon a very small scale. It is not encouraged 
by the Treasury. Life insurance can be effected and immediate or 
deferred annuities can be purchased either from the National Debt 
Commissioners or through the Post-Office. 

SUPERANNUATION ACT, 1909. 

The general scheme of providing life insurance in substitution of 
part of the pension recommended by the Courtney Commission was 
enacted into law on September 20, 1909, six years after the com¬ 
mission had submitted its report. In the interval, a nonofficial 
ballot was taken which showed that, contrary to the predictions of 
the minority members of the Courtney Commission, the proposed 
change was favored by a large majority of civil employees. 

Main Features of the Present Law. 

The scheme finally embodied in a bill and presented to Parliament 
differs somewhat from that presented by the Courtney Commission. 
The changes were made in accordance with the recommendations of 
a committee of actuaries appointed by the Treasury to review the 
work of the commission. They reported that a more liberal life- 
insurance provision could safely be given by reduction of the pension 
one-quarter than that suggested by the commission. Provision was 
accordingly made that for male civil employees entering the service 
after the passage of the act the superannuation allowance should be 
one-eightieth instead of one-sixtieth of the annual salary for each 
year of service, as was the case under the Act of 1859. Authority 
was then given the Treasury to grant to a retiring civil employee 

a Regulations with regard to the payment of salary and wages during sick leave 
are charged throughout the civil service to the effective vote, and do not form part of 
the superannuation scheme. Sick leave on account of injury is granted under depart¬ 
mental regulations, as in the case of ordinary illness. The regulations vary in differ¬ 
ent departments. In some cases the ordinary sick leave regulations apply, while in 
others sick leave is allowed at a higher rate of salary for a longer period in cases where 
the illness is due to an accident arising out of the officers’ official duties than in cases 
of ordinary illness. In cases of ordinary illness an established civil servant may be 
allowed (if necessary) six months’ sick leaie on full pay, followed by six months’ 
sick leave on half pay. If any further leave is required, and there is a reasonable 
probability of the officer’s recovery, he may receive for any such further period of 
sick leave the same rate of pay as if he had been retired on pension. 



174 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


who had served not less than two years, in addition to the super¬ 
annuation allowance (if any) or the gratuity (if any) available under 
section 6 of the Superannuation Act of 1859, a lump sum equal to 
one-thirtieth (instead of one-fortieth, as recommended by the Court¬ 
ney Commission) of the annual salary multiplied by the number of 
years of service, provided that the additional allowance should in no 
case exceed one and one-half times the amount of the annual salary 
and emoluments. To discourage continuance in office after the age 
of 65, provision is made that this additional allowance shall be 
reduced one-twentieth for every completed year served after attaining 
that age. By order in council dated November 29, 1898, all persons 
in the established civil service are liable to compulsory retirement at 
the age of 65. The power of retention, in special circumstances, for a 
period not exceeding five years, is, however, lodged with the Treasury. 
This provision in the Act of 1909 for further reducing the pension in 
case of such retention is evidently intended to discourage the exercise 
of such power, and to force practically everybody out of the service 
at the age of 65. In the case of an employee dying after five years’ 
service, while still employed in the service, his legal representatives 
receive a gratuity equal to the annual salary of his office and emolu¬ 
ments. If, however, he is over 65 years of age when he dies the 
amount received by his representatives is reduced by one-twentieth 
for each year of service rendered after he has attained that age, 
another discouragement to remaining in office after the age of 65. 
In the case of an employee dying soon after retirement and before 
the sums actually received by him at the time of his death on account 
of superannuation allowance, together with the sum received by him 
by way of additional allowance, equal the amount of his annual 
salary and emoluments, a gratuity equal to the deficiency is granted 
to his personal representatives. While the act applies only to future 
entrants into the service, the option is given male employees under 
60 years of age of accepting its provisions. In that case, the addi¬ 
tional allowance payable on retirement is increased by a bonus of 
one-half of one per cent for each year served before the passage of 
the act. With these modifications, the provisions of the various 
superannuation acts will still apply with respect to the qualifications 
for obtaining superannuation allowances and gratuities, to the man¬ 
ner of reckoning years of service and amount of annual salary and 
emoluments, to the diminution of superannuation allowances, and 
to the determination of questions by the Treasury. 

A bill along these lines “to amend the Superannuation Acts, 
1834 to 1892,” was introduced in the House of Commons on May 19, 
1909. It was referred to a standing committee which considered it on 
July 16, and made some slight verbal changes. The amended bill 
was then sent to the House of Lords on August 30, where section 6 
was amended, and on September 20 it became a law. 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 175 

Discussion of the Act in Parliament. 

The passage of this important bill through Parliament was marked 
by no notable discussion. On the second reading of the bill in the 
House of Commons slight objection was made to it by certain mem¬ 
bers, because its benefits,were not extended to unestablished as well 
as to established members of the civil service, because employees 
over 60 years of age did not come within the purview of the bill, and 
because the compensation to be paid on abolition of office was limited 
to the amount paid on retirement by reason of ill-health. In answer 
to these criticisms, Mr. Hobhouse, financial secretary to the Treasury, 
explained the intent and purpose of the bill, reviewing briefly the 
history of the movement which had led to its introduction, defending 
the points attacked, and laying emphasis on the fact that the bill 
made much more liberal provision for the civil servants than they 
had ever hoped to obtain. As his statement shows the Government’s 
attitude toward the measure, the greater part of it is here given. 
Said Mr. Hobhouse: ( a ) 

I think the reception which the bill has had at the hands of hon. 
gentlemen who have addressed the House has shown not merely that 
the bill itself was desired by the civil servants, but that the provisions 
of the bill, now that they have been examined by the civil servants, 
have proved eminently satisfactory to those servants. I may per¬ 
haps remind the House in what circumstances this bill has come 
into being. Throughout the four or five years between 1898 and 
1903 there was considerable movement on the part of the civil 
servants in regard to the terms of superannuation, which, owing, I 
think, entirely to a misconception on their part, they thought involved 
a very considerable reduction in their pay, and also resulted in a 
comparatively small number of those who contributed to the pension 
fund ever receiving any return from that fund. Owing to that 
feeling on their part, a movement was started by the civil servants 
asking that the whole terms of superannuation should be recon¬ 
sidered and altered, and so strong was that feeling that a commission 
was appointed under the presidency of Lord Courtney, to go into 
the whole terms or the superannuation of civil servants, and that 
commission made certain definite recommendations which perhaps 
the House will allow me to recall to their recollection. Before I do 
that, however, I should like to point out that the original demand of 
the civil servants was a very limited one; it was then confined to 
asking that there should be a refund of accumulated deductions 
from pay in case of any civil servant who died while still in the 
service of the State. It was a very limited demand, confined strictly 
to that request. The Courtney Commission made certain definite 
recommendations. They suggested the alteration of the scale of 
pensions from one-sixtieth of the pay for every year’s service to one- 
eightieth of pay for every year’s service, and they also suggested a 
gratuity of a year’s pay in the case of a civil servant dying in the 
service, or upon his retiring after forty years service. They also 


a Parliamentary Debates, House of Commons, Vol. 7, No. 88, p. 766. 




176 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

suggested that in the case of a civil servant who retired with less 
than forty years’ service, he should get a gratuity of one-fortieth 
of a year’s pay for each year’s service. 

These recommendations of the Courtney Commission were submit¬ 
ted to a plebiscite of the whole of the civil service, or so much of the 
civil service as can be reached by the arrangements of the Deferred 
Pay Committee. I Ueed not go into the whole history of the plebis¬ 
cites—there were two such plebiscites, and the last was taken on the 
simple issue whether they preferred the Courtney recommendations 
or whether they preferred the terms of the existing civil service super¬ 
annuation, and the result was an overwhelming declaration—over¬ 
whelming in strength from those civil servants who were consulted— 
80 per cent in favor of the terms recommended by the Courtney Com¬ 
mission. When that plebiscite had been taken it was quite clear that 
some alteration in the terms of the existing superannuation scheme 
must be made in order to meet the wishes of the service as a whole. 
There were two distinct defects about the Courtney scheme, and I 
think in that the hon. gentleman will entirely agree with me; namely, 
the hardships inflicted upon those civil servants who died in the 
service were met entirely at the expense of the potential pensioner, 
and the next defect was that there was no provision made for those 
who retired from the civil service before they had completed ten 
years’ service, and thus became pensionable, except that gratuity of 
a month’s pay for every year, which really was quite inadequate. 
When it was clear that the civil service wanted a reconsideration of 
the terms of superannuation it was quite clear that the pensionable 
treatment which would have to be given—which could be given— 
would have to be considered very carefully from the actuarial point 
of view, and I have had the services of three eminent actuaries who 
went very closely into the whole of the calculations necessary to 
evolve a scheme, and this bill is the outcome of that consideration. 
By it a pension of one-eightieth is substituted for the pension of one- 
sixtieth for each year’s service given, and as the pension is confined 
to the earnable period, is confined to the maximum of forty years, it 
is clear that the pension is reduced from a pension of two-thirds to a 
pension of one-half. 

In order to make up to the servants the reduction in pension, the 
following proposals are made, and the first of these deals with the 
hardship resulting to the civil servant who retires before he has com¬ 
pleted ten years’ service. Any civil servant who retires after two 
years’ service gets in addition to the gratuity which he now earns an 
additional allowance of one-thirtietli for every year’s service ren¬ 
dered. That is coupled with a deduction from his earnable allow¬ 
ance, if he serves to 65 years of age. Practically all civil servants 
have to retire at 65 years of age, with the exception of one or two 
favored individuals, who may serve for a year or two more, and also 
with the exception of a certain number of officers who are employed 
in and about the law courts, who may serve on for practically an 
indefinite period. * * * Next, any civil servant dying after five 

years’ service gets a gratuity of a year’s pay, and if a civil servant 
dies after he has retired from the service, but before he has drawn a 
whole year’s pay, the State makes up to him the equivalent of a 
year’s pay, whether by way of additional allowance or by making up 
the deficiency of the year’s pay. These very favorable conditions, 
far exceeding anything that the civil servants expected, are dependent 





CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


177 


upon two conditions, one that the option must be made within twelve 
months, and the other that the personnel of the service must be in a 
sound state of health. These are actuarial conditions laid down, upon 
which the whole scheme depends, and from which the Treasury would 
be quite unable to depart. 

Then I come to the provisions by winch only those officers who 
were under the age of 60 were allowed to opt. The age of 60 is 
the age at which the head of a department has no power any longer 
to retain the services of an officer. An officer can go, if he wishes, 
the moment he reaches 60, and draw his pension. It would be quite 
impossible, having regard to the actuarial calculations on which the 
scheme is based, to permit an officer who attains the age of 60 to 
take advantage of the new scheme and leave the service, carrying off, 
perhaps £1,000 [$4,866.50]. The possibility of doing that would clearly 
upset any actuarial calculations whatever. These proposals are to be 
made applicable to all future entrants and they can only be made 
applicable to existing servants if the actuarial calculations on which 
the scheme is based are observed. The whole of these proposals are 
based upon this, that no amount of money shall be taken away from 
the aggregate body of civil servants, and that in making these pro¬ 
posals no additional expenditure shall be incurred by the State. We 
nave a block sum which we do not intend to increase or to diminish, 
but within the capacity of that block sum we have redistributed the 
conditions under which the pension is payable. If the wishes of the 
hon. member for Exeter (Sir G. Kekewich) were accepted the other 
resulting benefits of the scheme would have to be reduced in order to 
comply with his wishes. I think it is very much better to give what 
you can to the great majority of civil servants rather than to give an 
advantage to a small class of officials, none of whom will probably be 
in the service for more than two or three years longer. 

A further advantage is given, namely, that all the existing civil 
servants who adopt and take advantage of the scheme are to get 
\ per cent bonus for each year served before the passing of the Act. 
That would be a substantial advantage to the civil servants, and it 
can only be done because in their case the State will escape the lia¬ 
bility of life assurance which is receivable by all future civil servants 
and all those who accept the scheme—a liability which may press 
heavily upon the State in their case. The scheme does not apply to 
women, because so many of the women who voted were against the 
application of the scheme to them, and although I should be pre¬ 
pared, if there were any evidence of a desire on the part of a large 
section of the existing women in the civil service to have the scheme 
applied to them to permit such an option, at the same time I have 
seen no indication of any desire on their part to have the scheme made 
optional. 

The proposal to substitute life insurance in lieu of a part of the 
pension naturally suggested questions as to the medical fitness of the 
Government clerks as a body. On August 17, Mr. Mitchell-Thomson, 
a member of the House of Commons asked the Secretary to the Treas¬ 
ury whether the new scheme of the superannuation bill was based 
on any actuarial calculation as to the average expectation of life of 
such existing civil servants as elect to come under the scheme, and if 
35885—S. Doc. 290, 61-2-12* 


178 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

the calculation was based on such an estimated average life, what 
necessity there was for a medical test of each candidate for admis¬ 
sion to the scheme; and whether it was intended to refuse admission 
to candidates whose lives were not good lives from an insurance point 
of view. There ensued the following: 

Mr. Hobhouse. The proposals as regards existing civil servants 
are based on the assumption that those electing to adopt the new 
scheme are in average good health. 

Mr. Mitchell-Thomson. Will the right hon. gentleman reply to 
the last part of the question ? 

Mr. Hobhouse. Yes, it is intended to exclude those who can not 
pass a reasonable test. 

Mr. Mitchell-Thomson. Is this scheme based upon actuarial cal¬ 
culations, and, if so, how does he defend it from the point of view of 
justice in excluding these people? 

Mr. Speaker. That is a matter of debate. 

Mr. Snowden. Is it intended that they should submit to an 
examination ? 

Mr. Hobhouse. Certificates will be required from the heads of 
departments. In accordance with the draft regulations before the 
House, which to some extent I mean to modify, all persons will have 
to submit a statement from the head of their department who are 
beyond a certain age. 

On the second reading of the bill in the House of Lords, on Septem¬ 
ber 13, a few explanatory remarks were made by Lord Denman in 
regard to the origin of the bill, including the statement that a com¬ 
mittee of actuaries appointed by the Treasury had “ reported that 
they were able to recommend certain improvements in the scheme 
which would give better results for the men themselves than the 
recommendations of Lord Courtney’s commission. This bill was 
regarded as a noncontentious bill,” said Lord Denman. “Really all 
it does, or seeks to do, is to distribute in a slightly different way cer¬ 
tain charges which appear annually on the votes; and therefore I 
trust it may have a smooth and a rapid passage through this House.” 

An amendment was brought up, however, by the Marquis of Lans- 
downe, who objected to section 6 of the bill which limited compen¬ 
sation for abolition of office to the amount allowed on retirement be¬ 
cause of ill-health and repealed section 7 of the Superannuation Act 
of 1859, the section which gave the Treasury power to grant abolition 
allowances. Said he: 

Now, my lords, I must say that prima facie there seems to me to be 
all the difference in the world between the case of a man who, owing to 
his own misfortune, is obliged to retire from the service, and the case 
of another man whose retirement is imposed upon him by the action 
of the Government of the day. The second case is one certainly of 
exceptional hardship, and I am surprised that it should have been 
thought proper to deprive those civil servants who are the sufferers 
from events of that kind of the special consideration which certainly 
in the time when I knew anything about these matters they used to 
receive. 





CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 179 

Lord Denman explained that section 6 simply legalized what had 
been the practice of the Treasury, with certain exceptions, for over 
twenty years, since no abolition terms had been granted for that 
length of time. Said he:(°) 

Perhaps I may be allowed for one or two minutes to go into the his¬ 
tory of the matter, because this clause has really rather a lengthy 
history. I understand that in 1888 a royal commission presided over 
by the late Lord Eidley, inquired into this matter. They found that 
these abolition terms had given rise to very great abuses and had been 
too often used to get rid of inefficient men. I think in the following 
year there was a debate in the House of Commons on this point, and 
a resolution was proposed protesting against the useless burdens 
which were placed upon the country by these abolition terms. An 
amendment was moved by the Government of the day, and the Gov¬ 
ernment were defeated on this point, possibly as a result of that de¬ 
bate. Mr. Goschen—as he was then—in August, 1889, said that for 
some time past these abolition terms had not been allowed; and Mr. 
W. H. Smith said— 

“It is our deliberate intention to legislate on this question at the 
earliest possible period next year.” 

Then there was a question put by my noble friend, Lord Wolver¬ 
hampton, on March 17, 1892. He asked whether it was the intention 
of the Government to introduce a measure relating to the superannua¬ 
tion of civil servants in accordance with the report of the royal com¬ 
missioners on civil establishments. Mr. Goschen, in reply, said that 
in view of possible delay before a new superannuation oill could be¬ 
come law, the Government had taken steps whereby effect had al¬ 
ready been given to the main recommendations of the royal commis¬ 
sion on the subject of civil superannuation. He went on to say that 
abolition of office no longer entitled the retiring officer to a special 
rate of pension. 

I believe it was formerly the practice of departments to organize 
and retrench on a very much larger scale than has been the case lat¬ 
terly, and no doubt abolition terms were much more useful in those 
days than they have since become. Nowadays it is very rarely that 
reductions of this kind are made in departments, and when a reduction 
takes place, if a man is an efficient civil servant a place for him is found 
in some other department. In the case of an inefficient man there is 
no hardship if the reduction takes place on the same terms as in the 
case of a person who is retired on the ground of ill-health. This clause 
really legalizes what has been the practice of the Treasury, with cer¬ 
tain exceptions, for over twenty years. 

Despite Lord Denman’s explanation, the lords amended section 6 
so as to make it apply “only to persons entering the service after the 
date of the passing of this act,” thus leaving those already in the 
service undisturbed in any of the privileges conferred on them by the 
Act of 1859. 

Immediately after the bill became a law regulations were made by 
the Treasury with reference to the conditions under which existing 
civil servants might be allowed to adopt the provisions of the act. 


a Parliamentary Debates, House of Lords, 14 Sep., 1909, Vol. 2, No. 59, p. 1184. 




180 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

These stated that application must be made through the head of the 
department, and must reach him on or before December 31, 1909. 
Application must be made on the following form: 

Application to adopt the provisions of the act under the terms of 
section 3 (1) and the treasury regulations of September, 1909. 

(1) Full name of applicant. 

(2) Department and situation. 

(3) Age. (Give date of birth.) 

(4) Are you in a good state of health and, so far as you know, free 
from any disorder or disease tending to shorten life ? 

(5) Have you had any illness during last 10 years necessitating 
your absence from duty for more than 15 consecutive days? If so, 
state the nature of such illness. 

(6) Are you now and have you always been of sober and temperate 
habits ? 

(7) State the number of days in the under-mentioned years on 
which you have been absent from duty on account of sickness, and 
the cause in each case: 


Calendar year. 

Number of 
days. 

Cause of absence. 

1905. 



1906. 



1907. 



1908. 



1909. 







(8) Declaration to be signed by the applicant: 

I hereby apply to be allowed to adopt the provisions of the Super¬ 
annuation Act, 1909, and I declare that the above statement of par¬ 
ticulars is true to the best of my knowledge and belief. 

Signature of applicant. 

Date. 

To be filled in by the Applicant’s Department. 

State whether the foregoing particulars correspond with the official 
records relating to the applicant so far as they can be verified, espe¬ 
cially under the Heads (3), (4), (6), and (7). 

Give the date of the applicant’s first Civil Service Certificate. 

The applicant is employed in a pensionable capacity, and his case 
is recommended for the favorable consideration of the Treasury. 

Signature of the head of the department 

or of other authorized officer. 

Date. 

In the case of a civil servant above 55 years of age at the date of 
the passing of the act, the application must be accompanied by 
certificate in the following form, signed by the medical officer of his 
department, or, where this is not practicable, by his regular medical 
attendant: 

1. Are you the medical officer of the applicant’s department, or his 
private medical attendant ? 

2. How long have you known him? 













CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


181 


3. Does he appear to be now in good health, and free from any 
disease or disorder tending to shorten life? 

4. Do you believe him to be and to have been sober and temperate? 

5. Do you consider him to be a person whom you could recommend 
to an assurance society for life assurance at the ordinary rate of 
premium ? 

If not, do you consider him as— 

(a) insurable at an addition to his actual age; or 

(b) uninsurable. 

Signature. 

Date. 

The Treasury may call for further medical evidence as to the con¬ 
dition of the applicant’s health in any case in which they consider it 
desirable. Should the statements made by the applicant be found to 
be untrue or inaccurate in any particular within the knowledge of the 
applicant, the Treasury may cancel the allowance of the application. 

CONCLUSIONS. 

The conclusions to be drawn from Great Britain’s century of expe¬ 
rience in pensioning its civil employees are very definite. That 
experience shows that pensions paid out of the public treasury as pure 
gratuities are certain to be taken into account in fixing salaries, and a 
pension system thus becomes, in effect, a contributory system. As 
soon as the employees realize that they are contributing to their own 
pension they at once demand that, on separation from the service for 
any cause whatever, the value of their contributions shall be returned 
to them in some form. It is in recognition of the reluctance of human 
nature to give something for nothing—shown first by the officers of 
the Government in taking the pension into account in fixing salaries, 
and next by the employees in their unwillingness to forfeit their con¬ 
tributions under any circumstance—that the pension * system of 
England was modified by the Act of September 20, 1909. 

The full significance of the final action of Parliament in amending 
the various superannuation acts, especially the Act of 1859, by the 
Act of 1909, is not brought out in the Parliamentary debates. It is 
really more than “merely a redistribution scheme,” as characterized 
by Mr. Hobhouse in the House of Commons, for it concedes the right 
of employees to the return of theoretical contributions. Actual 
deductions from salaries of employees were not contemplated by the 
former law. In the recognition by the Government of the fact that 
contributions are virtually exacted from employees through the 
practice of taking pensions into account in fixing salaries, lies the 
significance of this last legislation. In this last act the Government 
puts a legal stamp on the superannuation scheme of England as a 
contributory plan and not a pension system at all in the strictest 


182 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

dictionary meaning of the term pension as “a regular stipend paid by 
a government /’ that is, paid out of a common treasury. 

The general impression among people of the United States is that 
Great Britain had first a contributory plan of retirement which was 
found unsatisfactory and which was abandoned in 1859 for a straight 
pension that has proved eminently satisfactory. The well-known 
excellence of the British civil service is cited as sufficient proof of the 
merit of the British pension system and the failure of the contributory 
system which preceded it is taken by many to be conclusive evidence 
of the superiority of a straight pension over any plan which contem¬ 
plates contributions by the beneficiaries. It should be pointed out, 
however, that the excellence of the British civil service may logically 
be due, in part, to other causes than the pension system. The Civil 
Service Commission was established in England in 1855, just before 
the pension system, and it is safe to say that the appointment to office 
and promotion in office on the basis of merit would have had good 
results in the last half century even had the contributory plan of 
granting retiring allowances not been superseded by the system of 
free and universal pensions. 

Investigation has revealed the fact that very little objection was 
expressed by the employees to the contributory system of 1834 as 
such. It has also been shown that various people of wide official 
experience and consequence have, in recent years, expressed their 
regret that the exaction of definite contributions was ever abandoned. 
The objections to the contributory system were based on the inade¬ 
quacy of salaries to bear deductions, and the faults in the details of 
the scheme, particularly the lack of provision for returning contribu¬ 
tions in case of death or resignation and the failure to fund the con¬ 
tributions and keep the employees’ account with the Government 
separate from all others. 

It seems reasonable to suppose that the pension system which 
succeeded this contributory plan would have been popular with the 
employees themselves, if nc?P with the country. Doubtless it was for 
a short time in the beginning. The evidence shows, however, that 
the employees soon ceased to regard the pension as a pure gratuity 
and came to consider it as a benefit paid for by themselves out of 
reductions in salary, and subject to large chances of forfeiture through 
death or resignation, since statistics showed that not more than one 
out of seven entrants into the service remained to the pensionable 
age. Of about 100,000 individuals in the service in 1902, approxi¬ 
mately 70,000 were members of the Deferred Pay Committee, and 
claimed that pensions were deferred pay. 

This large body of employees held, in the second place, that the 
amount withheld from their salaries for the payment of pensions was 
more than necessary for the purpose. The Courtnev Commission 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


183 


sustained them in their first contention but refused to admit the sec¬ 
ond. Without an actuarial investigation, which they were apparently 
unwilling to undertake, it was not possible for the commissioners 
to disprove mathematically the claim of the employees that the amount 
withheld from salaries was excessive, and their denial of the claim 
must, therefore, be regarded as more or less arbitrary. Holding that 
the amounts withheld from salaries were entirely consumed in the 
payment of pensions, they were forced logically to refuse the request 
of the civil servants for a refund of the supposed excess in the form 
of free life insurance. They held, therefore* that the insurance 
could only be secured through a reduction of the pension. 

The important point to note is that the commission conceded that 
something was deducted from the employee’s pay for the purpose 
of pensioning him at the end of his period of service. The English 
pension system is, therefore, not a free and absolute system of gratui¬ 
ties at all but a system of theoretical contributions from the employ¬ 
ees’ salaries, more or less adequate to pay the benefits given. What¬ 
ever it may have been in the beginning, that is what it has become 
through the policy—a policy sure to develop under a system of gratui¬ 
ties, human nature being what it is—of taking the pension into con¬ 
sideration in fixing salaries. 

The English superannuation system having become avowedly a 
contributory system, the question to be investigated then is this: 
Is it a satisfactory form of contributory plan? It is undoubtedly 
more satisfactory to the employees, and justly so, since amended by 
the Act of 1909, than it was formerly under the Act of 1859. The 
problem of devising a satisfactory superannuation scheme for any 
service is one in which human nature is an element as well as arith¬ 
metic, and the fact should not be ignored that human nature is such 
that no system can be satisfactory to employees unless provision is 
made for the return, in some form, on separation from the service 
of their actual or theoretical contributions. This is abundantly 
shown by the testimony of Mr. Manly, the actuary, in regard to the 
experience of industrial schemes as well as by the British Govern¬ 
ment’s own experience. The Act of 1909 takes cognizance of this 
fact. While the refund of imaginary contributions is accomplished 
by means of a reduction in the pension, this disadvantage is offset 
by the fact that all those in the service will become beneficiaries 
under the scheme and not merely those who live to reach pensionable 
age. 

The amended scheme is undoubtedly more satisfactory, too, than 
the old contributory scheme of 1834 discarded for the pension system 
of 1859. It is more satisfactory because the scheme of 1834 required 
the forfeiture of the contributions—in that case, actual contribu- 


184 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

tions—on death or resignation, and because, like the pension system, 
it benefited only those who remained in the service and reached 
pensionable age. 

The question whether the present improved system is absolutely 
equitable as between individuals is difficult of satisfactory answer. 
It has been shown that it is more equitable than the old systems, but 
it can not be shown whether the amounts received by the employee in 
the form of pension, insurance, and cash-surrender values correspond 
with the amounts contributed by him, since it has not been ascer¬ 
tained what percentage of salary is withheld as a contribution. The 
Courtney Commission maintained that the theoretically contributed 
sum is no more, in the aggregate, than the amount required for pen¬ 
sions, but this does not prove that the sum contributed by any indi¬ 
vidual may not be more or less than what he should equitably con¬ 
tribute. A deduction of a given percentage of salary may be entirely 
adequate to furnish given benefits for a young man, while a deduction 
of the same percentage of salary will be quite inadequate to provide 
the same benefits for an older man. The failure of the Courtney Com¬ 
mission to gratify the request of the employees for a full investiga¬ 
tion into the subject so that the amounts actually withheld might 
be definitely determined makes any redistribution of benefits merely 
a guess rather than an exact calculation. In the absence of the 
necessary data, it is therefore impossible to answer the question: Is 
the present system absolutely equitable as between individuals? 

While it is to be assumed that the calculations made by the actu¬ 
aries are unimpeachable, it is to be noted that those calculations were 
limited in scope and undertaken merely to ascertain what benefits 
could be given by reducing the pension one-quarter. The problem 
of the actuaries was to distribute equitably a definite sum. They 
were not asked to go farther back and devise a contributory scheme 
that would be just as between the State and the individual or equi¬ 
table as between different classes of individuals. The amended sys¬ 
tem is held to be merely a scheme of redistribution, but it should not 
be forgotten that only one-quarter of the amount to be distributed 
has been subject to actuarial calculation. Whether the other three- 
quarters have been equitably distributed can not be stated. 

One thing, however, can be definitely stated regarding the present 
system in comparison with a system where the contributions are 
actually instead of only theoretically paid, and where they are funded 
and invested at interest. It is less economical. Under the exist¬ 
ing system, the necessary sum is appropriated each year out of 
the Treasury for the payment of pensions. This sum amounts 
to from 16 to 20 per cent, in the various departments, of the 
sums paid for salaries. Under a contributory system, the neces- 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN, 185 

sary sum would be accumulated gradually from many contribu¬ 
tions invested at interest. By reason of the fact that with the 
help of compound interest at the rate of 3 per cent per annum, 
the sum of a given contribution per annum will double itself in 
the course of a service of 42 years, and at 3J per cent in 36 years, 
and at 4 per cent in 31 years, it follows that the total contri¬ 
butions of an employee who serves 40 years need be less than half 
the amount required by direct appropriation from the Treasury to 
give the same pension. The question naturally suggests itself then: 
Why would it not be a wiser distribution of funds, if the British Gov¬ 
ernment in appropriating a sum for the maintenance of civil estab¬ 
lishments (including an amount for salaries and another amount for 
pensions) should increase the salaries by the amount of the sum 
spent for pensions but require employees to pay out of their salaries 
a contribution sufficient to meet the cost of pensions? The net 
result of thus preferring a scheme of actual contributions to one of 
theoretical contributions would be a general increase in salaries 
without increasing the appropriation for either salaries or pensions, 
thus effecting a saving of money to the employees that, under present 
conditions, is lost. 

The first lesson for other countries seeking light from the history 
of English superannuation schemes is, therefore, this: 

The logical plan to adopt is a contributory plan, since a pension 
system is certain to be treated as a contributory system, and since 
a pension system is far more costly. It is better, then, to adopt a 
contributory plan in the beginning, worked out on scientific lines, 
with a definite relationship between contributions and benefits to 
make it equitable as between all classes of employees rather than a 
pension in the beginning and finally a patched-up arrangement, the 
fairness of which is open to question. Had the Commissioners of 
1857 modified the contributory plan then in force in accordance with 
actuarial principles, the result would have been a more scientific and 
probably a more equitable arrangement than that which has just 
been arrived at after a half century of discontent and agitation. 
Had the Commissioners of 1857 arranged for the Government to 
assume the cost of all pensions on services rendered up to that time, 
and also increased the salaries of the employees sufficiently to pro¬ 
vide for the deductions necessary in the individual cases to create 
the pensions called for under a proper scale, together with a refund 
of accumulations in case of separation from the service and such 
insurance as was asked for, the scheme to-day would be self-supporting 
at a cost to the Government through the increase of salaries of about 
one-half of the amount which is now paid out in pensions. 

Other valuable lessons may be learned from Great Britain’s 
experience in retiring civil employees. It has been shown that 


186 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

not all contributory plans are good. To be satisfactory, a contribu¬ 
tory plan must be based on certain fundamental principles: 

The contributions should be placed in a fund and invested at 
interest under guarantee of the Government, a separate account 
being kept with each contributor. Failure to fund the contributions 
of the employees under the plan of 1834 led to unnecessary misap¬ 
prehension and discontent. No account having been kept of the 
amounts received by the Government in contributions from the 
employees and the amounts returned to them in pensions, it was 
not known whether the Government had gained or lost by the 
transaction. Nursing the belief that they had paid in more than 
was ever returned to the service, the employees harbored resentment 
against the Government. Failure to fund the contributions resulted 
also in the loss to the employees of the interest which they would 
have received had the contributions been invested. 

The amount of contributions should be determined by the amount 
of the annuity to be granted under the pension scale adopted. The 
annuity should be based on the amount of salary and the length of 
service which latter, in turn, depends largely on the age at entrance 
into the service. The percentage of deduction from salaries should 
vary, then, with the entrance age. This was not the case in the 
English contributory scheme of 1834, which was based on a flat-rate 
assessment for all ages of 2J per cent on salaries not exceeding £100 
($487) and 5 per cent on salaries exceeding that amount. The result 
was inequitable as between individuals of different ages and different 
salaries, the assessment being smaller than necessary for the older 
ages and in some cases a trifle larger than that required for the 
younger ages. As Doctor Farr pointed out, there was no direct con¬ 
nection between what was given and what was received. 

There must be sharp differentiation between accrued liabilities and 
future liabilities. The contributions made by present employees 
should be held in reserve to pay future pensions, and not consumed 
in paying pensions for past services. The accrued liabilities must 
be paid by the State or the contributed fund will become insolvent. 
To use the current contributions for the payment of pensions on 
back services is doubly destructive to any scheme because it not 
only takes the contributions that were paid in to meet future obliga¬ 
tions, but it cuts off the accumulation of interest. This disastrous 
course was followed under the contributory plan of 1834, as usually 
happens where there is a commingling of assets. The investigation 
made by Messrs. Ansell and Morgan, the actuaries, in 1857, showed 
that had the contributions been funded, the fund would by that 
time have been insolvent. The five per cent deduction from salaries 
was inadequate, not only because there were many employees whose 
age was such as to make a larger deduction than five per cent of 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 187 

salary necessary, but because the deductions of the young employees 
were consumed in paying pensions to old employees. 

Provision should be made for the refund of contributions in case 
of separation from the service, whatever the cause. The lack of 
this provision in the Act of 1834 was felt to be a hardship and an 
injustice. The forfeiture of contributions was especially resented 
when employees died while in the service. 

Under either a contributory or a pension system, the experience 
of Great Britain points to several other fundamental principles: 

Retirement from the service should be made compulsory at some 
given age. If it is merely optional 7 the purpose of the system is 
likely to be defeated by the continuance of aged people in the service. 
The need of compulsion was felt for years in England before action 
was taken in the matter. Although this phase of the subject was 
clearly brought out in the investigations of the Select Committee of 
1873 and in the inquiry of the Ridley Commission in 1886, and both 
bodies recommended that retirement be made compulsory at the 
age of 65, it was not until 1898 that the recommendation was carried 
out by means of an order in council. The importance of the principle 
is recognized in the most recent legislation on superannuation. The 
Act of 1909 provides for reduction in the superannuation allowance 
in the case of every employee who remains in the service, by favor 
of the Treasury, after reaching the age of 65 years. 

The amount of the retiring allowance should be calculated on the 
basis of the average rather than the final salary. The English 
pension is calculated on the basis of the salary received during the 
last three years of service, but there has been much discussion of this 
provision before the various commissions. Recognizing the fact that 
such a method of calculation is unsatisfactory, since it necessitates the 
use of a salary scale, which is always more or less unreliable, but 
evidently loath to make any great change because of the reduction in 
pension which it would cause, the Ridley Commission recommended 
an extension of the period used as a basis for calculation from three to 
ten years. The calculation of pensions on the ultimate rather than 
the mean salary is also open to special objection on the ground that it 
gives heads of departments and bureaus an incentive to show favor¬ 
itism in the matter of promotions and demotions in the final years of 
service. 

A provision for life insurance is a desirable adjunct to a retirement 
measure and one that is greatly appreciated by the employees. 
Such a provision has been urged by the British civil employees for 
over half a century. Life insurance benefits are less necessary, 
however, under a proper contributory plan than they have been 
under the contributory and pension plans of England, which made no 
refund of contributions in case of death. Under a plan which turns 


188 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


over the deductions from salary with interest to the representatives 
of the employee dying in the service, the need of insurance is only 
acutely felt in the earlier years before the accumulations of the 
employee amount to a considerable sum. During that period, term 
insurance, which can be bought at a very low premium, will provide 
protection. It should be noted that the medical selection exercised 
in carrying out the insurance provisions of the Superannuation Act of 
1909 , will necessarily result in improving the already high standard 
of excellence of the British civil service. 


Appendix I. 

SUPERANNUATION ACT OF 1834. 

ANNO QUARTO & QUINTO GULIELMI IV. REGIS. 

[Cap. XXIV.] 

AN ACT To alter, amend, and consolidate the laws for regulating the pensions, compensations, and allow¬ 
ances to be made to persons in respect of their having held civil offices in His Majesty’s service. [25th 

July 1834.] 

Whereas by an act passed in the fifty-seventh year of the reign of His late Majesty 
King George the Third, to enable His Majesty to recompense the services of persons 
holding or who have held certain high and efficient civil offices, His Majesty is em¬ 
powered to grant pensions, as therein provided, to persons who shall have served His 
Majesty, his heirs or successors, in the offices therein mentioned: 

And whereas by an act passed in the sixth year of the reign of His late Majesty King 
George the Fourth, for amending the said recited act, it is enacted, that the several 
other offices therein particularly described shall be deemed to be comprised in the 
several classes of offices in the said recited act respectively specified: 

And whereas it is expedient that the amount of the pensions by the said two acts 
authorized to be granted should as to future pensions be reduced, and the conditions 
under which the same shall be granted be altered and regulated: 

Be it therefore enacted by the King's Most Excellent Majesty , by and with the advice and 
consent of the Lords spiritual and temporal , and Commons in this present Parliament 
assembled , and by the authority of the same , That from and after the passing of this act 
no pension to be granted to any person in respect of his having served in any one or 
more of the offices of first lord of the treasury, or of one of His Majesty’s principal 
secretaries of state, or chancellor of the exchequer, or first lord of the Admiralty, or 
president of the board of commissioners for the affairs of India, or president of the 
committee of council appointed for the consideration of matters relating to trade and 
foreign plantations, shall exceed the sum of two thousand pounds per annum; nor 
shall any such pension be granted to any person unless he shall have held one or more 
of the said offices for a period of not less than two years in the whole, either uninter¬ 
ruptedly or at different times; nor shall any more or greater number than four such 
pensions hereafter to be granted, be existing or in force at the same time. 

II. And be it further enacted , That from and after the passing of this act no pension 
to be granted to any person in respect of his having served in either or both of the 
offices of chief secretary for Ireland or secretary at war shall exceed the sum of one 
thousand four hundred pounds per annum, nor shall any such pension be granted to 
any person unless he shall have held one or both of the said offices for a period of not 
less than five years in the whole, either uninterruptedly or at different times; nor 
shall any more or greater number than two such last-mentioned pensions be existing 
or in force at the same time. 

III. And be it further enacted, That from and after the passing of this act no pension 
to be granted to any person in respect of his having served in any one or more of the 
offices of one of the joint secretaries of the treasury, or first secretary of the Admiralty, 
or vice president of the*committee of commissioners appointed for the consideration 
of matters relating to trade and foreign plantations, shall exceed the sum of twelve 
hundred pounds per annum; nor shall any such pension be granted to any person 
unless he shall have held one or more of the said offices for a period of not less than five 




CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


189 


years in the whole, either uninterruptedly or at different times; nor shall any more or 
greater number than four such last-mentioned pensions be existing or in force at the 
same time. 

IV. And be it further enacted, That from and after the passing of this act the pension, 
not exceeding one thousand pounds, authorized by the said recited act to be granted 
to any person in respect of his having served in any one or more of the offices of one of 
the under secretaries of state, or clerk of the ordnance, or second secretary of the 
Admiralty, or one of the secretaries of the board of commissioners for the affairs of 
India, shall not be granted to any such person unless he shall have held one or more of 
the said offices for a period of not less than ten years in the whole, either uninter¬ 
ruptedly or at different times; nor shall any more or greater number than six such 
last-mentioned pensions be existing or in force at the same time. 

\ . Provided always , and, be it enacted, That in case it shall happen that any person 
shall have served His Majesty, his heirs or successors, in more than one class of offices 
herein-before specified, in respect whereof any pension less than two thousand pounds 
may be granted, it shall be lawful to grant, under the regulations aforesaid, to such 
person any pension annexed to the highest class of office in which such person may 
have been employed, whenever the whole period of the service of such person in the 
several offices in which he shall have been employed shall amount to ten years, 
although the period of the service of such person in such highest class shall not have 
extended to the period of five years; Provided always, That such person shall have 
served in such highest class for the period of not less than three years; and in cases in 
which the service of any such person in any class of those offices shall not be sufficient 
to entitle him to the pension of that class, it shall be lawful to grant him a pension 
not exceeding one thousand pounds, provided the period of his aggregate services in 
that and any inferior class or classes or department of the public service shall 
amount to ten years: Provided also, That there shall not be more than the aforesaid 
number of pensions to that amount existing at the same time. 

VI. And whereas the principle of the regulations for granting allowances of this 
nature is and ought to be founded on a consideration, not only of the services performed 
by the individual to the state, but of the inadequacy of his private fortune to main¬ 
tain his station in life; 

Be it therefore enacted, That from and after the passing of this act, whenever any 
person shall seek to obtain any one of the pensions before mentioned, his application 
for that purpose shall be made in writing to the commissioners of His Majesty’s treas¬ 
ury, to which he shall subscribe his name, and which shall contain, not only a state¬ 
ment of the services performed by him, and the grounds on which such pension is 
claimed, but a specific declaration that the amount of his income from other sources 
is so limited as to bring him within the intent and meaning of this act and the prin¬ 
ciple herein-above declared, and without such declaration no pension as herein¬ 
before provided or authorized shall be granted. 

VII. Provided always, and be it further enacted, That the several regulations with 
respect to the granting of any of the before-mentioned pensions, and to the receipt 
thereof by the persons to whom such grants may be made, which are contained in 
the said recited act of the fifty-seventh years of King George the Third and the sixth 
year of King George the Fourth, shall continue in full force and effect, and be appli¬ 
cable to pensions to be granted under the authority of this act, except so far as any 
such regulations are altered or repealed by the enactments contained in this act. 

VIII. And be it further enacted , That from and after the passing of this act an act 
made in the fiftieth year of the reign of His late Majesty King George the Third, to 
direct that accounts of increase and diminution of public salaries, pensions, and allow¬ 
ances shall be annually laid before Parliament, and to regulate and control the grant¬ 
ing and payment of such salaries, pensions, and allowances; and two several acts 
passed in the fifty-first year of the reign of His said late Majesty and in the third year 
of His late Majesty King George the Fourth, severally to amend the said act of the 
fiftieth year of the reign of King George the Third; and also an act passed in the 
fifth year of the reign of His said late Majesty King George the Fourth, to amend 
the said act of the third year of His said Majesty’s reign; and so much of an act passed 
in the sixth year of the reign of His said late Majesty, to regulate the payment of 
salaries and allowances to British consuls, as respects the allowance to be made to 
such consuls in the nature of superannuation or reward for meritorious public services; 
shall be and the same are hereby repealed, except so far as relates to any matter or 
thing already done under the said acts or either of them. 

IX. And be it further enacted, That from and after the passing of this act the super¬ 
annuation allowances to be granted to such officers and clerks who shall have entered 
the public service prior to the fifth day of August, one thousand eight hundred and 


190 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


twenty-nine (except only as herein-after is authorized), shall not exceed the follow¬ 
ing proportions with reference to the amount of their salaries and the periods of their 
services respectively (videlicet): 

To an officer, clerk, or person who shall have served ten years and upwards, and 
under fifteen years, any annual allowance not exceeding in amount four-twelfths of 
the annual salary and emoluments of his office; 

For fifteen years and upwards, and under twenty years, not exceeding five-twelfths 
of such salary and emoluments; 

For twenty years and upwards, and under twenty-five years, not exceeding six- 
twelfths of such salary and emoluments; 

For twenty-five years and upwards, and under thirty years, not exceeding seven- 
twelfths of such salary and emoluments; 

For thirty years and upwards, and under thirty-five years, not exceeding eight- 
twelfths of such salary and emoluments; 

For thirty-five years and upwards, and under forty years, not exceeding nine- 
twelfths of such salary and emoluments; 

For forty years and upwards, and under forty-five years, not exceeding ten-twelfths 
of such salary and emoluments; 

For forty-five years and upwards, and under fifty years, not exceeding eleven- 
twelfths of such salary and emoluments; 

And for fifty years or upwards, any annual allowance not exceeding the net amount 
of the salary and emoluments of his office. 

X. And be it further enacted, That from and after the passing of this act it shall not 
be lawful to grant to any officer or clerk who shall have entered the public service 
subsequent to the fourth day of August, one thousand eight hundred and twenty- 
nine, except as hereinafter authorized, any superannuation or allowance exceeding 
the following proportions, with reference to the amount of their salaries and the periods 
of their services respectively (videlicet): 

To an officer, clerk, or person who shall have served ten years and upwards, and 
under seventeen years, any annual allowance not exceeding in amount three-twelfths 
of the salary and emoluments of his office; 

For seventeen years’ service and upwards, and under twenty-four years, not exceed¬ 
ing four-twelfths of such salary and emoluments; 

For twenty-four years’ service and upwards, and under thirty-one years, not exceed¬ 
ing five-twelfths of such salary and emoluments; 

For thirty-one years and upwards, and under thirty-eight years, not exceeding six- 
twelfths of such salary and emoluments; 

For thirty-eight years and upwards, and under forty-five years, not exceeding 
seven-twelfths of such salary and emoluments: 

And for forty-five years and upwards, not exceeding eight-twelfths of such salary 
and emoluments: 

And in no case, except as herein-after is especially provided, shall any superannua¬ 
tion or allowance exceeding two-thirds of the salary and emoluments of any such 
officer, clerk, or person, be granted. 

XI. And be it further enacted, That from and after the passing of this act it shall 
not be lawful to grant any superannuation allowance to any officer or clerk who shall 
be under sixty-five years of age, unless upon certificates from the heads of the depart¬ 
ment to which such officer or clerk shall belong, and from two medical practitioners, 
that he is incapable, from infirmity of mind or body, to discharge the duties of his 
situation, nor unless he shall have discharged those duties with diligence and fidelity, 
to the satisfaction of the head officer or officers of his department, which shall be cer¬ 
tified by any two of such head officers if there shall be more than one, or by such 
head officer if there shall be but one; and in case the person claiming such superan¬ 
nuation allowance shall himself be the head officer, or one of the head officers, then 
such superannuation allowance shall not be granted unless he shall have discharged 
the duties of his situation with diligence and fidelity, to the satisfaction of the com¬ 
missioners of the Admiralty, if such head officer shall hold any office or situation under 
the control of that department, and in all other cases to the satisfaction of the com¬ 
missioners of the treasury; and the said commissioners of the Admiralty and treasury 
respectively shall express such satisfaction in their minute recommending or author¬ 
izing the grant of any such superannuation allowance. 

XII. Provided always, and be it further enacted, That the superannuation allowance 
to be granted to any officer or person after the passing of this act shall not be computed 
upon the amount of the salary enjoyed by him at the time of his retirement, unless 
he shall have been in the receipt of the same, or in the class from which he retires, 
for a period of at least three years immediately before the granting of such superannua¬ 
tion allowance; and in case he shall not have enjoyed his then existing salary, or 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


191 


have been in such class for that period, such superannuation allowance shall be cal¬ 
culated upon the average amount of salary received by such person for three years 
next preceding the commencement of such allowance. 

XIII. And be it further enacted. That all compensations and allowances granted, 
or hereafter under this act to be granted, as pensions or superannuations, shall be paid 
to the persons entitled to receive the same without any abatement or deduction in 
respect of any taxes or duties whatever at present existing. 

XIV. And be it further enacted , That the superannuation allowances authorized 
by this act shall extend to all such civil offices and departments as are set forth and 
enumerated in the schedule to this act, with such exceptions as are specified in the 
said schedule: Provided always, That it shall be lawful for the commissioners of His 
Majesty’s treasury, by any order on warrant under the hands of any three or more of 
them, to add to the list of offices and departments enumerated in the said schedule 
any other offices or departments which now exist or may hereafter be created or estab¬ 
lished, and to place the same, and the officers and persons employed therein, under 
the provisions of this act; in every which order or warrant the reasons for adding 
any such office or department shall be stated, and a copy of every such order or warrant 
shall be laid before Parliament within one month after the making thereof, if Parlia¬ 
ment shall be then sitting, and if not, then within one month after the then next 
sitting of Parliament; and all the provisions of this act, and all the powers, authorities, 
regulations, restrictions, and clauses therein contained, shall in every such case apply 
and be put in force with respect to every office or department which shall be so added 
as aforesaid as fully and effectually, to all intents and purposes, as if they had been 
originally specified and enumerated in the said schedule. 

XV. Provided always, and be it further enacted, That nothing in this act contained 
shall extend or be construed to extend to or authorize the adding to such list any 
offices held under military or naval commissions, entitling the holders of the same 
to half pay, or any military or naval allowance in lieu of or in addition to half pay, 
allowed under the regulation of any order of His Majesty in council to any persons 
for services in His Majesty’s army, navy, or ordnance, or any offices in any of His 
Majesty’s courts at Westminster or Dublin, or any other of His Majesty’s courts of justice 
elsewhere, or the comptroller of His Majesty’s exchequer, or any offices in relation to 
which the granting of any allowances for past services has been specially regulated 
by any act, or any offices held as sinecures, or executed principally by deputy. 

XVI. And be it further enacted, That no compensation hereafter to be made or 
superannuation allowance to be granted in respect of civil services to any person 
entitled to half pay in the army, ordnance, navy, or marines, who shall have been 
appointed to the civil service subsequently to the fourth day of August, one thousand 
eight hundred and twenty-nine, shall in any case, except as in this act is specially 
provided, exceed in the whole (computing his half pay in such compensation or 
allowance) the amount of two-thirds of the salary and emoluments of the office relin¬ 
quished by him: Provided always, That nothing in this act contained shall extend 
or be construed to extend to entitle any superintendent of a dock yard or other estab¬ 
lishment in the civil department of the navy, who shall have held any civil appoint¬ 
ment prior to the fifth day of August, one thousand eight hundred and twenty-nine, 
to any superannuation allowance under this act beyond the amount stipulated by 
the terms on which he shall have accepted the office of superintendent, or the amount 
established by any order of His Majesty in council concerning superintendents. 

XVII. Provided always, and be it further enacted, That in any case in which it shall 
appear to the commissioners of His Majesty’s treasury that any special circumstances 
afford to any officer or clerk in the several offices or departments mentioned in the 
schedule to this act, or in the addition authorized to be made thereto, who is not within 
the exceptions therein contained, a just claim to an amount of superannuation allow¬ 
ance not authorized by this act, or exceeding the amount therein specified with 
reference to the length of his service, it shall be lawful for the commissioners of His 
Majesty’s treasury to grant, or give authority for granting, any special superannuation 
which such officer or clerk shall appear to them to deserve; but in every such case the 
grounds on which such special superannuation shall be granted or authorized shall 
be stated in the grant thereof, or in the authority for granting the same, and also 
entered in the minutes of the treasury, and shall likewise be laid before Parliament 
within one month after the fifth day of January in each year, if Parliament be sitting 
during that period, or if not, then within one month after the ensuing meeting of 
Parliament. 

XVIII. And be it further enacted, That no compensation for any office abolished, 
nor any special allowance or remuneration for good services to any person holding or 
having held any civil office in any public department, shall be charged upon the 
incidents or any other fund of any such department; and that no such compensation, 


192 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


nor any allowance or compensation in the nature of superannuation or retired allow¬ 
ance or reward to any such person in respect of his having held any public office or 
employment, or having been engaged in any public service, shall be granted, allowed, 
or paid, other than under the authority of an order of His Majesty in council, or by 
the commissioners of His Majesty’s treasury, or any three or more of them. 

XIX. And be it further enacted and provided , That every person to whom any com¬ 
pensation or allowance, in consequence of the abolition or reduction of office, shall 
hereafter be granted shall at all times, when called upon, be liable to fill, in any part 
of His Majesty’s dominions in which he shall have already served, any public office 
or situation under the Crown for which his previous public services may render him 
eligible; and that if he shall decline, when called upon so to do, to take upon himself 
such office or situation, and execute the duties thereof satisfactorily, being in a com¬ 
petent state of health, he shall forfeit his right to any compensation or allowance 
which may have been granted to him in respect of any former services. 

XX. Provided always, and be it further enacted , That in case any person enjoying any 
superannuation allowance, in consequence of retiring from office on account of age, 
infirmity, or any other cause, or enjoying any compensation for past services upon 
the abolition or reduction of office, shall be appointed to fill any office in any public 
department, every such allowance or compensation shall cease to be paid for any 
period subsequent to such appointment, if the annual amount of the profits of the 
office to which he shall be appointed shall be equal to those of the office formerly 
held by him, and in case they shall not be equal to those of his former office, then 
no more of such superannuation allowance or compensation shall be paid to him than 
what with the salary of his new appointment shall be equal to that of his former office. 

XXI. Provided always, and be it further enacted, That nothing herein contained 
with respect to compensation, superannuation, or allowance for civil services, shall 
extend or be construed to extend to any military or naval half pay, or allowance in 
lieu of half pay, or to any military or naval allowance or pensions granted or to be 
granted, under the regulations of any order of His Majesty in council, in any of the 
respective departments of the commissioners of the Admiralty, the secretary at war, 
and the master general of the ordnance, except as herein-after is provided with respect 
to the same. 

XXII. And be it further enacted, That between the first day of February and the 
twenty-fifth day of March in every year, or if Parliament shall not be sitting during 
any part of that period, then within twenty days after the next meeting of Parliament, 
there shall be laid before both Houses of Parliament an account of every increase and 
diminution which shall have taken place within the preceding year, ending on the 
thirty-first day of December, in the number of persons employed in all public offices 
or departments under the Crown, and in the salaries, emoluments, allowances, and 
expences which shall have taken place or been paid, granted, received, or incurred 
for and in respect of all officers and persons belonging to or employed in all such 
public offices or departments, specifying the amount and nature thereof, and dis¬ 
tinguishing every increase and diminution in the amount of all allowances or com¬ 
pensations granted as retired allowances or superannuations to any person having 
held any office, place, or employment in any such public office or department, and 
also the time and length of service of every such person, and the amount of the salary 
and emoluments received by such person immediately preceding his superannuation 
or retirement, and the nature of his services, and the grounds upon which such 
increase or diminution in the establishment of every such public office or department, 
or of any such salary, emolument, allowance, compensation, or superannuation, shall 
have been granted or made; and also specifying the name of every person receiving 
such allowance or compensation who may have died in the course or the year, together 
with the amount of the annual allowance payable to such person. 

XXIII. Provided always, and be it further enacted, That accounts of all compensa¬ 
tions for offices abolished, and of all allowances in the nature of superannuation or 
retired allowances to all other persons in respect of their having held any public 
office or employment under the Crown, shall annually, at the period lastly provided, 
be laid before the Commons House of Parliament. 

XXIV. And whereas the scale of allowance under this act specifies the highest 
rate which a superannuated officer can receive unless his case be specially laid before 
Parliament: 

And whereas it is expedient that the Lords of His Majesty’s Treasury and the Lords 
of the Admiralty for the time being, respectively, should consider the health, age, 
meritorious conduct, and other circumstances of each party applying for a superan¬ 
nuation allowance, in order to exercise their discretion in fixing the amount of such 
allowance, subject always to the limitation prescribed by this act: 

And whereas it is expedient that Parliament should be made acquainted with the 
manner in which such discretion shall be exercised; 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


193 


Be it therefore enacted, That all orders of Ilis Majesty in council, and minutes of the 
lords of the treasury, which shall at any time be framed or passed laying down any 
general rule or regulation respecting the granting of superannuation allowances, shall 
within one month of the date thereof, if Parliament should be then sitting, or if not, 
then within one month after the commencement of the next ensuing session of Par¬ 
liament, be laid before the two houses of Parliament, respectively. 

XXV. Provided always, and be it further enacted , That all half pay and allowances 
in lieu of half pay in the several departments of the army, ordnance, navy, and 
marines, and all military and naval allowances or pensions granted or which shall be 
granted in any of such departments under the authority of any order in council, 
shall be annually laid before the Commons House of Parliament in separate estimates, 
at the same time with the ordinary estimates of those respective departments, and 
shall be kept distinct from all pensions, compensations, superannuation and retired 
allowances in any of the civil offices of those departments, respectively. 

XXVI. And be it further enacted, That the compensations, superannuations, and 
allowances authorized as well by this as any former act or acts shall, when not specially 
provided for by Parliament, be charged upon and paid and payable by the respective 
departments or offices in which the persons receiving such allowances shall have 
served. 

XXVII. And whereas the commissioners of the treasury did, by a minute dated 
the fourth day of August, one thousand eight hundred and twenty-nine, record their 
intention to adopt certain regulations with a view to reduce prospectively the charge 
incurred in providing for superannuation allowances, of which notice was given in the 
several public departments, for the information of those who should thereafter enter the 
public service: And whereas, in pursuance of the said minute, an annual abatement 
hath been made from the salaries and emoluments of the several persons who have 
entered the public service subsequent to the date thereof; and whereas it is expedient 
to continue such abatement in those cases, and to extend it to others, as hereinafter 
provided: Be it therefore further enacted, That from and after the passing of this act 
there shall be an annual abatement made, in quarterly proportions, by the proper 
officer in each respective department, from the salaries and emoluments of the several 
officers and persons employed in the several civil offices and departments specified 
in the schedule to this act, or to be specified in the addition authorized to be made 
thereto, and not within the exceptions thereof, who have since the date of the said 
minute entered or shall hereafter enter the public service, in such manner and under 
'such directions as shall from time to time be given in this respect by the commissioners 
of the treasury or of the Admiralty, as the case may be; the amount of which abate¬ 
ment shall be according to the respective rates following, that is to say: 

From salaries and emoluments not exceeding the annual sum of one hundred 
pounds, an abatement after the rate of two pounds ten shillings per centum; 

And from salaries and emoluments exceeding one hundred pounds, five pounds per 
centum; 

And in the cases of all persons whomsoever at present holding office and entitled 
to superannuation allowance under this act, who shall have been appointed to such 
office subsequently to the issue of the minute of the lords commissioners of His 
Majesty’s treasury, bearing date the fourth day of August, one thousand eight hundred 
and twenty-nine, for the future regulation of the several civil departments of the 
public service, and who shall hereafter, upon promotion, obtain any increase of 
salary or allowances in respect of their offices, an annual abatement, after the like 
rates, respectively, shall be made from the amount of such increase from time to time, 
commencing from the period when the same shall take place. 

XXVIII. And be it further enacted, That it shall be lawful for the person or persons 
at the head of any department in which any fees or other sources of profit may form 
part of the emoluments of any office in such department, to fix, with the approbation 
of the commissioners of His Majesty’s treasury, or for the commissioners of the Admiralty 
if the office shall be in that department, an average sum upon which the compensation 
or superannuation allowance shall be granted, as well as the sum to be annually 
abated, as hereinbefore provided, from such person’s salary in respect of such emolu¬ 
ments, which sum so to be fixed shall not exceed the average amount of such emolu¬ 
ments for the three last preceding years. 

XXIX. And be it further enacted, That the vice-treasurer of Ireland shall at all 
times, when required so to do by the commissioners of His Majesty’s treasury,transmit 
to the said commissioners accounts of the execution of this act, and of all matters and 
things relating thereto, in his execution of the powers thereof, in such manner and 
form, and containing such particulars as he shall in that behalf be from time to time 
directed. 

35885—S. Doc. 290, 61—2-13* 


194 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


XXX. Provided always, and be it further enacted, That nothing in this act contained 
shall extend or be construed to extend to give any person an absolute right to com¬ 
pensation for past services, or to any superannuation or retiring allowance under this 
act, or to deprive the commissioners of His Majesty’s treasury, and the heads or prin¬ 
cipal officers of the respective departments, of their power and authority to dismiss 
any person from the public service without compensation. 

XXXI. And be it further enacted, That this act may be amended, altered, or repealed 
by any act or acts to be passed in this present session of Parliament. 

Schedule referred to in the aforegoing act. 


Offices or departments. 


Exceptions. 


Treasury. 

Office of vice-treasurer in Ireland. 
Office of privy council, Great Britain 
and Ireland. 

Office of committee for trade. 

Offices of secretaries of state. 

Office of secretary for Ireland. 


Lords of the treasury and joint secretaries. 

President of the council. 

President and vice-president. 

Secretaries and under secretaries. 

Chief secretary, the parliamentary counsel for 
Irish affairs. 


Alien office. 

Consuls-general and consuls restricted 
from being engaged in trade. 

State paper office. 

Office of registrar of slaves. 

Police offices in London and Middle¬ 
sex and borough of Southwark. 
Commander of the forces office, 
England and Ireland. 
Quartermaster-general’s office, ditto.. 

Adjutant-general’s office, ditto. 

War office. 

Army medical board. 

Board of general*officers. 

Chaplain-general’s office. 

Judge-advocate-general’s office.. 

Army pay office. 


Ordnance office 


Chelsea and Kilmainham hospitals... 

Royal Military College. 

Royal Military Asylum. 


Admiralty and naval establishments 
at home and abroad. 


Navy pay office. 

Tax office and stamp office. 
Customs. 

Excise. 

Post-office. 

Royal mint. 

Audit office. 

Comptrollers of army accounts. 


I Commander in chief and his secretary, and 
officers acting under military commissions. 

Secretary at war. 

Officers acting under military commissions. 

Judge-advocate-general. 

Paymaster-general. 

Master-general. 

Clerk of the ordnance. 

Surveyor-general. 

Principal storekeeper. 

Secretary to master-general, and all persons 
holding their situations by military commis¬ 
sion. 

Treasurer of the ordnance. 

Persons who, being military officers, may be 
■ entitled to full or half pay as such, subject, 
however, to the provisions of this act. 

Lords of the admiralty and secretaries. 
Superintendents of dock yards and victualling 
yards, and naval medical establishments or 
hospitals, not having been employed in the 
civil service of the navy prior to the fifth day 
of August, One thousand eight hundred and 
twenty-nine, and officers acting by virtue of 
naval or military commissions or warrants, 
. and entitled to half pay. 

The treasurer. 


The postmaster-general. 
The master of the mint. 






















CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


Schedule referred to in the aforegoing act —Continued. 


Offices or departments. 

Exceptions. 

National debt office. 


Office of comptroller of the exchequer. 
Exchequer bill office. 

Stationery office. 

The comptroller-general. 

Office of woods, forests, works, etc... 
King’s remembrancer’s office in the 
exchequer of Scotland. 

First commissioner. 

Office of auditor of the exchequer of 
Scotland. 

Signet and privy seal offices, Scot¬ 

Auditor. 

land. 

British and Irish fishery. 



195 


IRELAND. 


Office of teller of the excheq 
Commissariat. 


uer 


The teller. 


Persons holding aominissions entitling them to 
half pay, subject, however, to the provisions 
of this act. 


Hibernian school for soldiers’ chil¬ 
dren. 

Board of education. 

Privy seal office. 

Board of charitable donations and 
bequests. 

Registrar of deeds. 


Appendix II. 

SUPERANNUATION ACT, 1859. 

[22 Viet., Chapter 26.] 

AN ACT To amend the laws concerning superannuations and other allowances to persons having held 
civil offices in the public service. [19th April, 1859.] 

Whereas an act was passed in the session holden in the fourth and fifth years of 
King William the Fourth, chapter twenty-four, “to alter, amend, and consolidate the 
laws for regulating the pensions, compensations, and allowances to be made to persons 
in respect of their having held civil offices in His Majesty’s service; ” 

And whereas by an act of the session holden in the twentieth and twenty-first years 
of Her Majesty, chapter thirty-seven, section twenty-seven of the first-recited act, 
by which an abatement was directed to be made from the salaries of civil servants 
entitled to superannuation allowance, was repealed; 

And whereas it is desirable further to amend the said act as hereinafter mentioned: 

Be it therefore enacted by the Queen's Most Excellent Majesty , by and with the advice and 
consent of the Lords , spiritual and temporal , and Commons , in this present Parliament 
assembled , and by the authority of the same , as follows: 

I. Sections ten, eleven, thirteen, fourteen, fifteen, seventeen, nineteen, and 
twenty-four of the said act of the fourth and fifth years of King William the Fourth 
are hereby repealed, but such repeal shall not affect any pension, compensation, or 
superannuation allowance granted or act done before the passing of this act. 

II. Subject to the exceptions and provisions hereinafter contained, the superan¬ 
nuation allowance to be granted after the commencement of this act to persons who 
shall have served in an established capacity in the permanent civil sendee of the 
state, whether their remuneration be computed by day pay, weekly wages, or annual 
salary, and for whom provision shall not otherwise have been made by act of Parlia¬ 
ment, or who may not be specially excepted by the authority of Parliament, shall 
be as follows (that is to say): 
























196 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


To any person who shall have served ten years and upwards, and under eleven 
years, an annual allowance of ten-sixtieths of the annual salary and emoluments of 
his office; 

For eleven years, and under twelve years, an annual allowance of eleven-sixtieths 
of such salary and emoluments; 

And in like manner a further addition to the annual allowance of one-sixtieth in 
respect of each additional year of such service, until the completion of a period of 
service of forty years, when the annual allowance of forty-sixtieths may be granted; 
and no addition shall be made in respect of any service beyond forty years: 

Provided always , That if any question should arise in any department of the public 
service as to the claim of any person or class of persons for superannuation under this 
clause, it shall be referred to the commissioners of the treasury, whose decision shall 
be final. 

III. Nothing herein contained shall interfere with the grant, to the officers and 
clerks who entered the public service prior to the fifth day of August, one thousand 
eight hundred and twenty-nine, of such superannuation allowances as might hereafter 
have been granted to them under section nine of the said act of the fourth and fifth 
years of King William the Fourth, or shall prevent, restrict, or diminish any other 
superannuation allowance, pension, gratuity, or compensation which, if this act had 
not been passed, might hereafter have been granted to any person who shall have 
entered the public service before the passing of this act, but, except as aforesaid, the 
provisions hereinafter contained shall apply as well to persons who have already 
entered the public service, whether before or after the said fifth day of August, one 
thousand eight hundred and twenty-nine, as to those who may hereafter enter the 
public service. 

IV. It shall be lawful for the commissioners of the treasury from time to time, by 
any order or warrant, to declare that for the due and efficient discharge of the duties 
of any office or class of offices to be specified in such order or warrant, professional or 
other peculiar qualifications, not ordinarily to be acquired in the public service, are 
required, and that it is for the interest of the public that persons should be appointed 
thereto at an age exceeding that at which public service ordinarily begins; and by 
the same or any other order or warrant to direct that when any person now holding 
or who may hereafter be appointed to such office or any of such class of offices shall 
retire from the public service, a number of years not exceeding twenty, to be specified 
in the said order or warrant, shall, in computing the amount of superannuation allow¬ 
ance which may be granted to him under the foregoing section of this act, be added 
to the number of years during which he may have actually served, and also to direct 
that in respect of such office or class of offices the period of service required to entitle 
the holders to superannuation may be a period less than ten years, to be specified in 
the order or warrant; and also to direct that, in respect of such office or class of offices, 
the holder may be entitled to superannuation, though he may not hold his appoint¬ 
ment directly from the Crown, and may not have entered the service with a certificate 
from the civil service commissioners: Provided always , That every order or warrant 
made under this enactment shall be laid before Parliament. 

V. It shall be lawful for the commissioners of the treasury to grant to any person 
who, being the holder of an office in respect of which a superannuation allowance may 
be granted, but not having completed the period which would have entitled him 
to a superannuation allowance, is compelled to quit the public service by reason of 
severe bodily injury, occasioned, without his own default, in the discharge of his 
public duty, a gratuity not exceeding three months’ pay for every two years of service, 
or a superannuation allowance not exceeding ten-sixtieths of the annual salary and 
emoluments of his office. 

VI. It shall be lawful for the commissioners of the treasury to grant to any person 
who, being the holder of an office in respect of which a superannuation allowance may 
be granted, is constrained, from infirmity of mind or body, to leave the public service 
before the completion of the period which would entitle him to a superannuation 
allowance, such sum of money by way of gratuity as the said commissioners may 
think proper, but so as that no such gratuity shall exceed the amount of one month’s 
pay for each year of service. 

VII. It shall be lawful for the commissioners of the treasury to grant to any person 
retiring or removed from the public service in consequence of the abolition of his 
office, or for the purpose of facilitating improvements in the organization of the depart¬ 
ment to which he belongs, by which greater efficiency and economy can be effected, 
such special annual allowance by way of compensation as on a full consideration of the 
circumstances of the case may seem to the said commissioners to be a reasonable and 
just compensation for the loss of office; and if the compensation shall exceed the 
amount to which such person would have been entitled under the scale of superannu- 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


197 


ation provided by this act if ten years were added to the number of years which he 
may have actually served, such allowance shall be granted by special minute, stating 
the special grounds for granting such allowance, which minute shall be laid before 
parliament, and no such allowance shall exceed two-thirds of the salary and emolu¬ 
ments of the office. 

VIII. It shall not be lawful for the commissioners of the treasury to grant the full 
amount of superannuation allowance which can be granted under this act to any 
person not being the head officer or one of the head officers of a department, unless 
upon production of a certificate (signed by the head officer of the department, or by 
two head officers, if there be more than one) that he has served with diligence and 
fidelity to the satisfaction of such head officer or officers; and in every case in which 
any superannuation allowance is granted, after the refusal of such certificate, the 
minute granting it shall state such refusal and the grounds on which the allowance is 
granted. 

IX. Provided , That it shall be lawful for the commissioners of the treasury to grant 
to any person any superannuation, compensation, gratuity, or other allowance of 
greater amount than the amount which might be awarded to him under the foregoing 
provisions, when special services rendered by such person, and requiring special 
reward, shall appear to them to justify such increase, but so that such allowance shall 
in no case exceed the salary and emoluments enjoyed by the grantee at the time of 
retirement, and the grounds of every such increase shall be stated in a minute of the 
treasury, which shall be laid before parliament; and it shall be lawful for the said com¬ 
missioners to grant to any person any such allowance of less amount than otherwise 
would have been awarded to him where his defaults or demerit in relation to the public 
service appear to them to justify such diminution. 

X. It shall not be lawful to grant any superannuation allowance under the provisions 
of this act to any person who shall be under sixty years, unless upon medical certifi¬ 
cate to the satisfaction of the commissioners of the treasury that he is incapable, from 
infirmity of mind or body, to discharge the duties of his situation, and that such 
infirmity is likely to be permanent. 

XI. Every person to whom a superannuation or compensation allowance shall have 
been granted before he shall have attained the age of sixty years shall, until he has 
attained that age, be liable to be called upon to fill, in any part of Her Majesty’s do¬ 
minions in which he shall before have served, any public office or situation under the 
Crown for which his previous public services may render him eligible; and if he shall 
decline, when called upon to do so, to take upon him such office or situation, or shall 
decline or neglect to execute the duties thereof satisfactorily, being in a competent 
state of health, he shall forfeit his right to the compensation or superannuation allow¬ 
ance which had been granted to him. 

XII. And whereas it will be for the advantage of the public service that officers 
holding employments entitling them to superannuation allowances under this or other 
acts shall be eligible for other public employments at home and abroad, without for¬ 
feiting their claims to such allowances. 

Every officer already or hereafter to be transferred from employment entitling him 
to superannuation allowance to public employment under the Crown not so entitling 
him shall be entitled, on his ultimate retirement from the public service, to the same 
allowance as if he had continued to hold the vacated appointment and at the same 
rate of salary as when the same was vacated, subject nevertheless to the conditions 
which would in that case have been applicable with respect to the grant of such allow¬ 
ance; provided that it shall be lawful for the commissioners of the treasury, in the 
case of officers transferred to governorships and lieutenant-governorships of colonies, 
and other high offices abroad, conferred for a limited period, to grant such super¬ 
annuation allowance to such officers on the expiration of such term of service without 
a renewal of public employment; but any officer to whom such grant is made while 
under the age of sixty years shall be subject to the same liability to be called upon to 
fill office under the Crown, as herein provided concerning other persons under that 
age to whom like allowances are granted. 

XIII. All orders, warrants, and minutes by this act directed to be laid before 
Parliament shall be laid before both Houses of Parliament within fourteen days after 
the making thereof if Parliament be sitting, and if Parliament be not sitting, then 
within fourteen days after the next meeting thereof. 

XIV. No pension shall be granted under the provisions of section six of the act of 
the fifty-seventh year of King George the Third, chapter sixty-five, to any person 
who shall not have had a seat in one of the Houses of Parliament during the period 
or one-half of the period for which he has held office, as in the said section is men¬ 
tioned. 


198 


CIVIL-SEE VICE RETIREMENT IN GREAT BRITAIN. 


XV. The several sections mentioned in the schedule hereto of the several acts of 
Parliament, also therein mentioned, shall be construed as if this act, instead of the 
said act of the fourth and fifth years of the reign of King William the Fourth, had 
been referred to in the said sections; and such other enactments as refer to the scale 
of superannuation allowance established by the provisions hereby repealed of the 
said act of King William the Fourth shall be construed as if the scale established by 
this act had been referred to. 

XVI. All superannuations, compensations, gratuities, and other allowances granted 
or hereafter under this act to be granted shall be paid to the persons entitled to receive 
the same without any abatement or deduction in respect of any taxes or duties what¬ 
ever at present existing, except the tax upon property or income. 

* XVII. For the purposes of this act, no person hereafter to be appointed shall be 
deemed to have served in the permanent civil service of the State unless such person 
holds his appointment directly from the Crown, or has been admitted into the civil 
service with a certificate from the civil service commissioners; nor shall any person, 
already appointed to any office, be held to have served in the permanent civil service 
as aforesaid, unless such person belong to a class which is already entitled to super¬ 
annuation allowance, or to a class in which, if he had been appointed thereto subse¬ 
quently to the passing of this act, he would, as holding his appointment directly 
from the Crown, or as having been admitted into the civil service with such certificate 
as aforesaid, have become entitled to such allowance; and no person shall be entitled 
to any superannuation allowance under this act, unless his salary or remuneration 
has been provided out of the consolidated fund of the United Kingdom of Great 
Britain and Ireland, or out of monies voted by Parliament. 

XVIII. So much of the said act of the fourth and fifth years of King William the 
Fourth, chapter twenty-four, as is now in force and not hereby repealed, and this 
act, shall be construed together as one act. 

XIX. It shall be sufficient, in citing this act, to use the expression “The super¬ 
annuation act, 1859.” 

Schedule A. 

5 & 6 W. 4. c. 42. s. 1. 

7 W. 4. & 1 Viet. c. 30. s. 21. 

8 & 9 Viet. c. 100. ss. 5. 10. 

13 & 14 Viet. c. 89. s. 39. 


Appendix III. 

SUPERANNUATION ACT, 1887. 

[50 & 51 Viet., Chapter 67.] 

AN ACT To amend the superannuation acts, 1834 and 1859, and for other purposes. [16th September 1887.] 

Be it enacted by the Queen's Most Excellent Majesty, by and with the advice and consent 
of the Lords spiritual and temporal, and Commons, in this present Parliament assembled , 
and by the authority of the same, as follows: 

1. (1) Where a person employed in the civil service of the state is injured— 

(a) in the actual discharge of his duty; and 

(b) without his own default; and 

(c) by some injury specifically attributable to the nature of his duty, 

the treasury may grant to him, or, if he dies from the injury, to his widow, his mother, 
if wholly dependent on him at the time of his death, and to his children, or to any of 
them, such gratuity or annual allowance as the treasury may consider reasonable, and 
as may be permitted by the terms of a warrant under this section. 

(2) The treasury shall forthwith after the passing of this act frame a warrant regu¬ 
lating the grant of gratuities and annual allowances under this section, and the war¬ 
rant so framed shall be laid before Parliament. 

(3) Provided, That a gratuity under this section shall not exceed one year’s salary 
of the person injured, and an allowance under this section shall not, together with any 
superannuation allowance to which he is otherwise entitled, exceed the salary of the 
person injured, or three hundred pounds a year, whichever is less. 

2. (1) Where a civil servant is removed from his office on the ground of his inability 
to discharge efficiently the duties of his office, and a superannuation allowance can 
not lawfully be granted to him under the superannuation acts, 1834 and 1859, and the 


15 & 16 Viet. c. 73. s. 15. 
15 & 16 Viet. c. 87. s. 46. 
17 & 18 Viet. c. 78. s. 22. 
19 & 20 Viet. c. 110. s. 9. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


199 


treasury think that the special circumstances of the case justify the grant to him of a 
retiring allowance, they may grant to him such retiring allowance as they think just 
and proper, but in no case exceeding the amount for which his length of service would 
qualify him under sections two and four of the superannuation act, 1859, without any 
addition under section seven of that act. 

(2) A minute of the treasury granting an allowance under this section to any civil 
servant shall set forth the amount of the allowance granted to him, and the reasons 
for such allowance, and shall be laid before Parliament: Provided, That the treasury 
before making the grant shall consider any representation which the civil servant 
removed may have submitted to them. 

3. Where a person at the time he becomes a civil servant within the meaning of this 
act is serving the state in a temporary capacity, the treasury may, if in their opinion 
any special circumstances of the case warrant such a course, direct that his service in 
that capacity may be reckoned for the purposes of the superannuation acts, 1834 and 
1859, and this act, as service in the capacity of a civil servant, and it shall be so reck¬ 
oned accordingly. 

4. If a person employed in any public department in a capacity in respect of which 
a superannuation allowance can not be granted under the superannuation act, 1859, 
retires, or is removed from his employment, and 

(a) the employment is one to wnicn he was required to devote his whole time, and 

( b) the remuneration for the employment was paid entirely out of moneys provided 
by Parliament, and 

(c) he has served in the employment for not less than seven years, if he is removed 
in consequence of the abolition of his employment, or for the purpose of facilitating 
improvements in the organisation of the department by which economy can be 
effected, or for not less than fifteen years if his retirement is caused from infirmity of 
mind or body, permanently incapacitating him from the duties of his employment, 
the treasury may, if they think fit, grant to him a compassionate gratuity not exceed¬ 
ing one pound or one week’s pay, whichever is the greater, for each year of his service 
in his employment. 

5. A person shall not be entitled to reckon the same period of time both for the pur¬ 
pose of a superannuation allowance under the superannuation acts, 1834 and 1859, and 
this act, and also for the purpose of naval or military noneffective pay. 

6. (1) The treasury may, within one month after the passing of this act, frame rules 
as to the conditions on which any civil employment of profit under any public depart¬ 
ment as defined by this act, or any employment of profit under the government of any 
British possession, or any employment under the government of any foreign state may 
be accepted or held by any persons who is in receipt of or has received any sum granted 
by Parliament for the pay, half-pay, or retired pay of officers of Her Majesty’s naval 
or land forces, or otherwise for payment for past service in either of such forces, or who 
has commuted the right to receive the same, and as to the effect of such acceptance or 
holding on the said pay or sum, and the treasury may in such rules provide for the 
enforcement thereof by the forfeiture, suspension, or reduction of any such pay or 
sum as aforesaid, or of any commutation money or remuneration for such employment. 

(2) Such rules shall also provide for the returns to be laid before Parliament of such 
officers accepting employment as are affected by the rules, and shall come into opera¬ 
tion at the date of the passing of this act. 

(3) The rules shall be laid before both houses of Parliament forthwith. 

(4) For the purposes of this section “ British possession ” means any part of Her 
Majesty’s dominions out of the United Kingdom, and this section shall apply to Cyprus 
as if it were a British possession. 

7. (1) Where any sum in respect of pay, pension, superannuation, or other allow¬ 
ance or annuity is due in respect either of service as a civil servant, or of military or 
naval service, to a person who is a lunatic, whether so found by inquisition or not, 
such sum may be from time to time applied for his benefit by tne prescribed public 
department in such manner as the department think expedient. 

(2) Where any annuity, whether pension, superannuation, or other allowance, is 
payable out of moneys provided by Parliament to a person in respect either of service 
as a civil servant or of military or naval service, and such person is or becomes a 
lunatic toward whose maintenance a contribution is made out of money provided 
by Parliament, then as long as the contribution is made his annuity shall be reduced 
by an amount equal to that contribution, and if the amount of the contribution exceeds 
the amount of the annuity, the annuity shall cease to be payable. 

8. On the death of a person to whom any sum not exceeding one hundred pounds is 
due from a public department in respect of any civil pay, superannuation, or other 
allowance, annuity or gratuity, then, if the prescribed public department so direct, 
but subject to the regulations (if any) made by the treasury, probate or other proof 


200 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


of the title of the personal representative of the deceased person may be dispensed 
with, and the said sum may be paid or distributed to or among the persons appearing 
to the public department to be beneficially entitled to the personal. estate of the 
deceased person, or to or among any one or more of those persons, or in case of the 
illegitimacy of the deceased person or his children, to or among such persons as the 
department may think fit, and the department shall be discharged from all liability 
in respect of any such payment or distribution. 

9. The decision of the treasury on any question which arises as to the application 
of any section of this act to any person, or as to the amount of any allowance or gratuity 
under this act, or as to the reckoning of any service for such allowance or gratuity, 
shall be final. 

10. Nothing in this act shall be construed so as in any way to interfere with the 
rights existing at the passing of this act of any civil servant then holding office. 

11. Every warrant and minute under this act which is required to be laid before 
Parliament shall be laid before both houses of Parliament in manner provided by 
section thirteen of the superannuation act, 1859. 

12. In this act, unless the context otherwise requires— 

The expression “civil servant” means a person who has served in an established 
capacity in the permanent civil service of the state within the meaning of section 
seventeen of the superannuation act, 1859; 

The expression “treasury” means the commissioners of Her Majesty’s treasury; 

The expression “public department” means the treasury, the commissioners for 
executing the office of Lord High Admiral, and any of Her Majesty’s principal secre¬ 
taries of state, and any other public department of the government; and the expression 
“prescribed public department” means, as respects any matter, the department pre¬ 
scribed for the purpose of that matter by the treasury. 

13. The act of the session of the fourth and fifth years of the reign of King William 
the Fourth, chapter twenty-four, intituled “An act to alter, amend, and consolidate 
the laws for regulating the pensions, compensations, and allowances to be made to 
persons in respect of their having held civil offices in His Majesty’s service,” is in 
this act referred to and may be cited as the superannuation act, 1834, and that act 
and the superannuation act, 1859, are together in this act referred to as the super¬ 
annuation acts, 1834 and 1859. 

The said acts and this act may be cited together as the superannuation acts, 1834 
to 1887, and this act may be cited separately as the superannuation act, 1887. 

14. The acts set forth in the schedule to this act are hereby repealed to the extent 
in the third column of that schedule mentioned as from the passing of this act, without 
prejudice to anything previously done or suffered in pursuance of the enactments 
hereby repealed. 


Schedule .' 
ACTS REPEALED. 


Session and chapter. 

Title or short title. 

Extent of repeal. 

4&5 Will. 4 c. 24.... 

An act to alter, amend, and consolidate 
the laws for regulating pensions, com¬ 
pensations, and allowances to be 
made to persons in respect of their 
having held civil offices in His Maj¬ 
esty’s service. 

Section sixteen. 

6 & 7 Will. 4 c. 13_ 

An act to consolidate the laws relating 
to the constabulary force in Ireland. 

Section thirty. 

7 Will. 4 & 1 Viet, 
c. 25. 

An act to make more effectual provi¬ 
sions relating to the police in the dis¬ 
trict of Dublin metropolis. 

Section nineteen. 

2 & 3 Viet. c. 47. 

An act for further improving the police 
in and near the metropolis. 

Section nineteen. 

2 & 3 Viet. c. 93. 

An act for the establishment of county 
and district constables by the author¬ 
ity of justices of the peace. 

Section eleven. 

22 Viet. c. 26. 

The superannuation act, 1859.. 

Section five. 

Section twenty- 
seven. 

22 & 23 Viet. c. 32... 

An act to amend the law concerning 
the police in counties and boroughs 
in England and Wales. 












CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 

Schedule —Continued. 

ACTS REPEALED—Continued. 


201 


Session and chapter. 


Title or short title. 


Extent of repeal. 


31 & 32 Viet. c. 90... 


33 & 34 Viet. c. 96... 


35 & 36 Viet. c. 12... 


An act to empower certain public de- The whole act. 
partments to pay otherwise than to 
executors or administrators small 
sums due on account of pay or allow¬ 
ances to persons deceased. 

An act to apply a sum out of the con- Subsections four, 
solidated fund to the service of the ! five, and six of 
year ending the thirty-first day of I section six. 

March one thousand eight hundred 
and seventy-one, and to appropriate 
the supplies granted in this session of 
Parliament. 

The superannuation act, 1872. The whole act. 


Appendix IV. 

WARRANT REGULATING THE GRANT OF GRATUITIES AND ALLOW¬ 
ANCES UNDER SECTION 1 OF THE SUPERANNUATION ACT, 1887. 

In conformity with the provisions of the 1st section of the superannuation act, 1887, 
we, being two of the lords commissioners of Her Majesty’s treasury, do hereby direct 
that any award of a gratuity or annual allowance made under the said section shall be 
subject to the following conditions, viz: 

The award shall be calculated upon one or other of the following scales, which shall 
respectively apply to— 

I. Established officers of prisons or criminal lunatic asylums injured by the violence 
of a prisoner or lunatic; or established officers of a manufacturing department of the 
war office or Admiralty, in which the duties are exceptionally dangerous. 

II. All civil servants not falling under the above description, and also all hired 
person employed in a manufacturing department of the war office or Admiralty in 
which the duties are exceptionally dangerous. 

III. All other hired persons employed in a public department. 

Scales I and II. 

To the retired allowance for which the injured man would be qualified by length of 
service, shall be added an allowance not exceeding the under-mentioned portion of 
his salary and emoluments at the date of the injury, viz: 

When his capacity to contribute to his support is— 



Scale I. 

Scale II. 

Slightly impaired. 

Six-sixtieths. 

Five-sixtieths. 
Ten-sixtieths. 
Fifteen-sixtieths. 
Twenty-si xtieths. 

Impaired. 

Twelve-sixtieths. 

Materially impaired. 

Totally destroyed. 

Eighteen-sixtieths. 

Twenty-four-sixtieths . . 


Provided that no award on Scale I shall, together with any retired allowance for 
which the injured man would be qualified by length of service, exceed the amount 
of his salary and emoluments at the date of the injury, or <£300 a year, whichever is 
less; and that no award on Scale II shall, together with any retired allowance for which 
he would be qualified by length of service, exceed fifty-sixtieths of his salary and emolu¬ 
ments at the date of the injury, or £300 a year, whichever is less. 

























202 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


Scale III. 

(а) A gratuity not exceeding the under-mentioned portion of the salary and emolu¬ 
ments of the injured man at the date of the injury, or <£100, whichever is less, viz: 

When his capacity to contribute to his support is— 

Slightly impaired, one-third. 

Impaired, two-thirds. 

Materially impaired, the whole. 

(б) When his capacity to contribute to his support is totally destroyed, he shall receive 
an annual allowance exceediing by fifteen-sixtieths of his salary and emoluments the 
rate of retired allowance for which he would have been qualified by length of service 
if he had been a civil servant, provided that the total award shall not exceed forty-five- 
sixtieths of his salary and emoluments at the date of the injury, or £300 a year, which¬ 
ever is less. 

An award under any of the above scales shall be so much less than the usual amount 
as the treasury shall think reasonable, in case— 

(а) The usual amount exceeds by not less than £100 a year the rate of retired allow¬ 
ance for which the length of the injured man’s service would entitle him; or 

(б) The injured man has continued to serve for not less than one year after the 
injury in respect of which he retires; or 

(c) The injured man is 55 years of age or upwards at the date of the injury; or 

( d ) The injury is not the sole cause of retirement, i. e., the retirement is caused 
partly by age or infirmity. 

WIDOWS AND CHILDREN OF MEN KILLED WHILE IN THE DISCHARGE OF DUTY. 

An award shall be on one or other of the following scales, according as the deceased 
had been— 

I. An established officer of a prison or of a criminal lunatic asylum killed by a 
prisoner or lunatic; or an established officer of a manufacturing department of the war 
office or Admiralty, of which the duties are exceptionally dangerous. 

II. A civil servant not falling under the above description, or a hired uerson em¬ 
ployed in a manufacturing department as above. 

III. Any other hired person employed in a public department. 

Scale I. 

Pension to widow, while unmarried and of good character, not exceeding ten- 
sixtieths of the husband’s salary and emoluments at the date of the injury, or £15 a 
year, whichever is greater; and 

Pension to each child until he or she attains the age of 15, not exceeding one-sixth of 
the rate which might be granted to the widow, but the aggregate of the children’s 
pensions not to exceed the amount which might be granted to the widow. 

Scale II. 

Pension to widow not to exceed ten-sixtieths of the husband’s salary and emolu¬ 
ments, or £10 a year, whichever is greater; and 

Gratuity to children, not exceeding £1 multiplied by the total number of their 
years, starting from their ages at the time of their father’s death, and ending with 15 
years; the total gratuity not to be less than £10 or more than £50. 

Scale III. 

Pension to the widow not exceeding eight-sixtieths of the husband’s salary and 
emoluments, or £10, whichever is greater. 

Gratuity to children not exceeding 16 shillings multiplied by the total number of 
their years, starting from their ages at the date of their father’s death and ending with 
15 years; the total gratuity not to be less than £8 or more than £40. 

In the case of motherless children the award under any scale may be of twice the 
usual rate. 

If the service of the deceased at the date of the injury was less than five years the 
award under any scale shall be— 

To the widow a gratuity not exceeding one-half of the salary and emoluments of 
the deceased. 

To each child a gratuity not exceeding one-twelfth of the salary and emoluments 
of the deceased; but the total gratuity to widow and children shall not exceed one 
year’s salary and emoluments of the deceased. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


203 


MOTHERS OF MEN KILLED IN THE DISCHARGE OF DUTY. 


If the deceased does not leave a widow, and if his mother was wholly dependent 
upon him for her support, the award which might have been made to a widow may be 
made to the mother. 


(Signed) 

Treasury Chambers, September, 1887. 


Herbert Eustace Maxwell. 
W. H. Walrond. 


Appendix V. 

SCHEME OF COMPENSATION (NO. 116) IN CASE OF INJURY TO WORK¬ 
MEN IN GOVERNMENT ESTABLISHMENTS. 

[D. 780—Established May, 1903; revised December, 1907.] 

Certified by the chief registrar of friendly societies, under date of 16th December, 

1907, as providing scales of compensation not less favourable to the workmen and 

their dependants than the corresponding scales in the workmen’s compensation act, 

1906. The new or altered provisions are italicized. 

A. Death from injury. 

1. When it is established to the satisfaction of the treasury that the death of a 
workman has resulted from an injury to which the provisions of the workmen’s com¬ 
pensation act, 1906, apply, and that the workman has left any dependants wholly or 
partially dependent upon his earnings at the time of his death, a sum equal to the 
earnings of the deceased in the employment of the Government during the three years 
next preceding the injury, or the sum of £150, whichever is the larger, but not exceed¬ 
ing in any case £300, shall be payable in the case of dependants wholly dependent, 
and half the same sum in the case of dependants partially dependent (where there 
are no dependants wholly dependent); provided that the amount of any weekly pay¬ 
ments made under this scheme in respect of the injury causing the death of the work¬ 
man and any lump sum paid in commutation thereof shall be deducted from the sum 
payable. 

If the period of the workman’s employment by the Government has been less than 
the said three years, the amount of the earnings of the deceased during the said three 
years shall be deemed to be 156 times his average weekly earnings during the period 
of his actual employment by the Government. 

The sum awarded will be paid to the dependants or to a trustee or trustees on their 
behalf as the case may be. 

2. The treasury may, in any case in which the authorities of a department consider 
that the interests of a workman’s dependants would be better served by a pension to 
the widow or mother (where there is no widow) than by a lump sum, deal with the 
case as follows, namely: 

There shall be deducted from the lump sum payable to the dependants under the 
scheme a portion for the dependent child or children, if any. Such portion shall not 
exceed one-half of the entire amount if there is only one child, or two-thirds if there 
are more than one, and there shall be granted to the widow or mother (where there 
is no widow) a pension equal to the annuity which the remainder of the aforesaid 
lump sum would purchase according to the post-office tables for the purchase of imme¬ 
diate annuities. Such pension shall not be liable to forfeiture in the event of the 
re-marriage of the recipient. 

3. If the authorities of the department consider it desirable in the interests of a 
workman’s dependants that a trustee or trustees should be appointed to administer 
for their benefit the money awarded as compensation to them, they may appoint a 
trustee or trustees, and pay the said money to him or them to be administered for the 
benefit of the dependants accordingly. 

4. On the death of a workman leaving no dependants a payment of not more than 
£10 shall be made, to cover the reasonable expenses of his medical attendance and burial, 
as under the workmen’s compensation act. 



204 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


B. Incapacity from injury. 

5. When incapacity for work results from the injury, the injured workman shall 
receive for the period, not exceeding six months, during which he is on the hurt list 
on account of the injury, half his average weekly earnings during the previous 12 
months, if he has been so long employed, and if not, half his average weekly earnings 
for any less period during which he has been in the employment of the Government. 

Should, however, the average weekly earnings of a workman, who is under 21 years of 
age at the date of the injury, be less than 20 shillings, such earnings shall be paid in full, 
but the weekly payments shall in no case exceed 10 shillings. 

6. Should the rate of pay of his class be increased while he is on the hurt list he 
shall participate in the increase. 

7. In addition he shall receive free treatment in hospital, when the use of a hospital 
is available to his department for the purpose. When it is not so available, he shall 
receive free medical attendance. 

8. Any workmen now serving who are entitled under the regulations of their depart¬ 
ment to more favourable treatment while on the hurt list than is provided for above 
shall continue to be so entitled. 

9. When total or partial incapacity for work continues beyond the period for which 
the workman receives hurt pay, as provided by clause 5, an allowance shall be paid 
to him at the following rates, during the continuance of the incapacity, viz: WTien 
his capacity to contribute towards his own support has been shown to the satisfaction 
of the treasury to have been— 

(1) Totally destroyed, then twenty-four sixtieths; 

(2) Materially impaired, eighteen sixtieths; 

(3) Impaired, twelve sixtieths; 

(4) Slightly impaired, six sixtieths; 

of his average weekly earnings during the previous 12 months, if he has been so long 
employed; but if not then during any less period for which he has been in the employ¬ 
ment of the Government. Provided that in any case where it appears on sufficient evi¬ 
dence that a doubt exists as to the incapacity of the workman under this clause the treasury 
may obtain the opinion of a second medical practitioner. 

In the case of a workman who was under 21 years of age at the date of the injury, and 
whose average weekly earnings were less than 20 shillings, double the above rates of com¬ 
pensation shall be awarded, provided that the weekly payment shall in no case exceed 10 
shillings. 

10. If the workman continues in or returns to the employment of the Government, 
after the injury, the allowance awarded to him by way of compensation shall be paid 
to him in addition to his earnings in the employment of the Government so long as 
the degree of incapacity continues on account of which it was awarded, provided that 
the said allowance, when added to his weekly earnings shall not exceed his average 
weekly earnings during the 12 months preceding the injury, or during any shorter 
period for which he has been in the employment of the Government, as the case may 
be. Until such limit is reached no deduction shall be made from the said allowance. 

In the case of a workman who was under 21 years of age at the date of the injury, and 
whose average weekly earnings were less than 20 shillings, the allowance awarded by way 
of compensation, when added to his weekly earnings, may be allowed to exceed the average 
weekly earnings before the injury, as above determined, by such an amount as the treasury 
may think that the circumstances justify. 

Periodical adjustments of the award in accordance with these provisions may be 
made at such intervals as may be sanctioned by the treasury. 

11. If, after the injury, the workman leaves the employment of the Government, 
the allowance shall be in addition to the pension, if any, for which he is qualified by 
length of service, provided that the compensation for injury and the pension in respect 
of length of service shall not together exceed his pay at the date of the injury, or £300 
a year, whichever is the less. 

12. A permanent allowance awarded by way of compensation may be commuted 
for a single payment, the amount of which shall be settled between the workman and 
the authorities of the department, with the sanction of the treasury. 

13. A claim for compensation for an injury which occurred more than three years 
before the claim is preferred, and which is not the cause of the applicant’s discharge 
from the service, can not be entertained unless it can be clearly shown that the pros¬ 
pect of obtaining further employment has been diminished in consequence of the 
injury. 

14. Any workman who wishes to withdraw from the scheme may do so at any time. Notice 
of withdrawal must be given by him in writing, on a form which will be supplied for the 
purpose on application, and the withdrawal unll take effect as regards any acndent happen¬ 
ing after the receipt of the notice by the duly authorised officer. 



CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


205 


15. Workmen who do not contract that the provisions of the scheme shall be sub¬ 
stituted for the provisions of the act, or who at any time withdraw from the scheme, must 
thenceforward be dealt with, in cases of injury, solely in the manner provided by the 
act; and any benefits, in cases of injury, which such workmen now receive can no 
longer be accorded. 


Appendix VI. 

AN ACT To amend the superannuation acts, 1834 to 1892 (20th September, 1909). 

Be it enacted by the King's Most Excellent Majesty, by and with the advice and consent 
of the Lords, spiritual and temporal, and Commons, in this present Parliament assembled 
and by the authority of the same, as follows: 

I. (1) The proportion of the annual salary and emoluments on which the scale of 
the superannuation allowances to be granted to male civil servants is to be calculated 
shall, in the case of civil servants who enter the service after the passing of this act, 
be one-eightieth instead of one-sixtieth, and accordingly section two of the superan¬ 
nuation act, 1859, shall, as respects such civil servants, have effect as if for the words 
“sixtieth” and “sixtieths,” wherever they occur, there were substituted the words 
“eightieth” and “eightieths.” 

(2) The treasury may grant by way of additional allowance to any such civil servant 
who retires after having served for not less than two years, in addition to the superan¬ 
nuation allowance (if any) to which he may become entitled or the gratuity (if any) 
which may be granted to him under section six of the superannuation act, 1859, a 
lump sum equal to one-thirtieth of the annual salary and emoluments of his office 
multiplied by the number of complete years he has served, so, however, that the 
additional allowance shall in no case exceed one and a half times the amount of such 
salary and emoluments: 

Provided, That, if a civil servant retires from the service after attaining the age 
of sixty-five years, there shall be deducted from the amount of the additional allow¬ 
ance which would otherwise be payable to him one-twentieth of that amount for every 
complete year he has served after attaining that age. 

II. (1) Where a male civil servant who enters the service after the passing of this 
act dies, after he has served five years or upwards, whilst still employed in the service, 
the treasury may grant to his legal personal representatives a gratuity equal to the 
annual salary and emoluments of his office: 

Provided, That if he dies after attaining the age of sixty-five years, the amount of 
the gratuity which may be so granted shall be reduced by one-twentieth of that amount 
for every complete year he has served after attaining that age. 

(2) Where any such civil servant having become entitled to a superannuation 
allowance dies after he has retired from the service, and the sums actually received by 
him at the time of his death on account of such superannuation allowance, together 
with the sum received by him by way of additional allowance, are less than the amount 
of the annual salary and emoluments of his office, the treasury may grant to his legal 
personal representatives a gratuity equal to the deficiency. 

III. (1) Subject to regulations made by the treasury, the treasury may allow any 
male civil servant who has entered the service before the date of the passing of this 
act, and who at that date is under sixty years of age, to adopt the provisions of this act, 
and in such case there may be granted to him or his legal personal representatives 
such superannuation and other allowances and gratuity as might have been granted 
had he entered the service after the passing of this act, except that the amount of the 
additional allowance payable on retirement shall be increased by one-half per cent in 
respect of each complete year he had served at the passing of this act. 

(2) Nothing in this act shall affect the right to superannuation allowance or gratuity 
of a civil servant who has entered the service before the passing of this act, and who 
either is at that time over sixty years of age, or is under sixty years of age and does not 
adopt the provisions of this act. 

IV. Subject to the provisions of this act the provisions of the superannuation acts, 
1834 to 1892, with respect to the qualifications for obtaining superannuation allowances 
and gratuities, and to the manner of reckoning years of service and amount of annual 
salary and emoluments, and to the diminution of superannuation allowances, and to 
the determination of questions by the treasury shall apply in respect of additional 
allowances and gratuities under this act in like manner as they apply in respect of 
superannuation allowances under those acts. 



206 


CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 


V. A warrant framed by the treasury under section one of the superannuation act, 
1887, with respect to the grant of gratuities and allowances to civil servants injured 
in the discharge of their duty may be revoked or from time to time varied by a fresh 
warrant, and every such warrant shall be laid before Parliament. 

VI. (1) It shall be lawful for the treasury to grant to any person retiring or removed 
from the public service in consequence of the abolition of his office, or for the purpose 
of facilitating improvements in the organisation of the department to which he 
belonged, by which greater efficiency and economy can be effected, such special allow¬ 
ance or allowances by way of compensation as on a full consideration of the circum¬ 
stances of the case seem to the treasury to be a reasonable and just compensation for 
the loss of office, but not exceeding in any case the amount which a civil servant would 
be entitled to or which might be granted to a civil servant if he retired on the ground 
of ill health. 

(2) The foregoing provision shall apply only to persons entering the service after 
the date of the passing of this act, and shall apply to those persons in substitution for 
section seven oi the superannuation act, 1859. 

Nothing herein contained shall affect the application of the said section seven of the 
superannuation act, 1859, to persons who have entered the service before that date 
or the practice of the treasury thereunder. 

VII. (1) The treasury may from time to time make rules for the purpose of carrying 
this act into effect and for making such adaptations and modifications of the provisions 
of the superannuation acts, 1834 to 1892, and other enactments relating to superannua¬ 
tion allowances and pensions of persons who have served partly in the civil service 
and partly in some other service entitling them to a pension as may be necessary for 
adapting those provisions to the provisions of this act, and for altering the rules made 
by the treasury under the superannuation act, 1892. 

(2) Before any rules made under this section come into force a draft thereof shall 
be laid before each House of Parliament for a period of not less than thirty days during 
the session of Parliament, and if either of those houses of Parliament, before the expi¬ 
ration of those thirty days, presents an address to His Majesty against the draft or any 
part thereof, no further proceedings shall be taken thereon, without prejudice to the 
making of any new draft rules. 

VIII. This act may be cited as the superannuation act, 1909, and shall be read as 
one with the superannuation acts, 1834 to 1892, and those acts and this act may be cited 
together as the superannuation acts, 1834 to 1909. 




CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


207 











CONTENTS. 


Civil-service retirement in New Zealand, by Herbert D. Brown: Page. 

Summary. 211 

Pension system, 1858 to 1871. 212 

Pension act of 1856. 213 

Pension act of 1858 (the first general pension). 215 

Reorganization of civil service and pension act of 1866. 215 

Abolition of civil pensions in 1871. 215 

Compulsory savings scheme, 1886 to 1893. 217 

Reasons for adoption of the scheme. 217 

Need of a proper superannuation system recognized. 220 

Civil-service insurance act, 1893. 222 

Main features of the act. 222 

Purpose of the act. 223 

Debate on the bill in Parliament. 224 

Criticism of the act. 226 

Public service superannuation act. 1907. 228 

Superannuation bill first introduced, 1906. 228 

Collection of statistics of civil service made by actuary. 229 

Cost of proposed bill based on statistics collected. 233 

Consideration of how cost might be met. 234 

Recommendation of actuary of how cost should be met. 238 

Amendments to the proposed bill recommended by actuary. 239 

Advantages of a superannuation system cited by actuary. 240 

Superannuation bill of 1907 introduced. 240 

Actuary made only estimate of cost, instead of calculation. 242 

Main features of the law enacted. 244 

Operation of law, first six months. 246 

Public attitude in regard to law. 247 

Teachers’, police, and government railways superannuation acts consoli¬ 
dated . 249 

Comparison of benefits under various government schemes. 250 

Report on the teachers’ fund. 251 

Report on the police fund. 252 

Report on the government railways fund.. 253 

Conclusions.- 254 

Appendix: 

Public service superannuation act, 1907. 257 

35885—S. Doc. 290, 61-2-14* 


209 





































\ 


CIVIL SERVICE RETIREMENT IN NEW ZEALAND. 

BY HERBERT D. BROWN.® 

SUMMARY. 

The Government of New Zealand has proceeded with great delib¬ 
eration and conservatism in working out the problem of retiring its 
civil employees. It has profited to a marked degree by the experience 
of others, and has sought to avoid mistakes that have wrecked the 
schemes of other countries. 

A system of granting straight pensions and gratuities out of the 
Treasury was begun in 1858 and continued until 1871, when it was 
abolished, chiefly on the ground of expense. 

Then for thirteen years the Government did nothing for its aged 
employees except pay “compensation” (they called it “compensa- 
sation for loss of office”) to the extent of one month’s salary for 
every year that an employee had been in the service. 

In 1886, with a view to the reduction of public expenditures, an 
act was passed which required all civil employees to save 5 per cent 
of their salaries. This amount was deducted from their salaries and 
handed over to the public trustee, an official of the New Zealand Govern¬ 
ment, whose functions and office may be called peculiar to that colony, 
who invested it and returned it with interest to the employee, when 
the latter left the public service. 

This savings arrangement proving inadequate as a superannuation 
measure in the case of employees who lived a long time after retire¬ 
ment, it was abolished in 1893, and New Zealand adopted for civil 
employees a system of compulsory insurance through the Government 
Life Insurance Office. The premiums were deducted from salaries, 
according to a sliding scale. The employees insured themselves for 
each of two alternative benefits—for a death benefit in case of death 
before reaching the age of 60 years, or for an annuity if living at that 
age. 

Compulsory insurance, owing to the heavy premiums necessary 
to provide both benefits, proved as unsatisfactory a provision for 
retirement as compulsory savings had been. All classes of govern¬ 
ment employees were discontented, but after 1893 no retirement leg¬ 
islation affecting employees of the “Public Service” proper was passed 
until 1907. Measures affecting special classes of government employ¬ 
ees such as the police force, the railway officers, and teachers were 

a Mr. Brown desires to give credit to Harriet Connor Brown for valuable assistance 
in the collection of historical data. 


211 



212 CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 

passed, however, in the intervening years. The superannuation laws 
enacted were as follows: 

In 1899, the Police Provident Fund Act, subsequently consolidated 
into “The Police Force Act, 1908.” In 1902, the Government Rail¬ 
ways Superannuation Fund Act, subsequently consolidated into 
“The Government Railways Act, 1908.” In 1905 the Teachers’ 
Superannuation Fund Act subsequently consolidated into “The 
Public Service Classification and Superannuation Amendment Act, 
1908.” In 1907 the Public Service Superannuation Act subsequently 
consolidated into “The Public Service Classification and Superan¬ 
nuation Act, 1908.’ 

It is reported (by the American consul-general at Auckland, New 
Zealand) that these separate schemes will no doubt soon be amal¬ 
gamated in one uniform system. They are all established on a 
contributory basis, the employees paying into the fund a percentage 
of salary which varies according to age at entrance into the service, 
and the Government paying £20,000 ($97,330) yearly to the public- 
service fund, besides whatever more may be necessary, £7,000 
($34,066) to the teachers’ fund, and guaranteeing to make up any 
deficiency in all other schemes. The pensions granted are based on 
length of service and average salary during the last three years. 
Payment of pensions on services rendered prior to the adoption of 
this plan is made entirely by the State. The State contributes some¬ 
thing also to the pensions of those whose service begins after the 
adoption of the plan, since the benefits promised under the plan are 
more generous than could be provided by any feasible deduction 
from salary. ( a ) 

THE PENSION SYSTEM, 1858 TO 1871. 

The changes made by New Zealand from time to time in its method 
of providing for superannuated employees reflect the material and 
economic progress of the colony. 

The history of New Zealand as a British colony dates from the 
year 1840. From 1840 to 1853 New Zealand was governed as a 
Crown colony, all the real authority of government resting with 
officials in the Colonial Office in England. A governor, an executive 
council, and a legislative > council held office in New Zealand, but 
all were appointed directly by the Crown. In 1852 the imperial 
Parliament passed an act which conferred on the colony a constitu¬ 
tion. Popular elections were held in 1853 and the first colonial par¬ 
liament met on May 24, 1854. Those who had drawn up the consti¬ 
tution had failed to provide for what is called “responsible govern¬ 
ment,” by which is meant a government in which “Ministers, the 
responsible officers of the Crown, assume and resign office practically 


° See page 247. 



CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 213 

at the will of a majority of the representatives of the people.’’ The 
constitution of 1852 contained no provision for bringing the ministry 
to an end by vote of the House, and the Colonial Office in England 
had sent no directions on this point. All the newly elected members 
of the House of Representatives could do, therefore, was to make 
speeches, the real power being still vested in the old executive council. 
The acting governor was influenced by members of that same execu¬ 
tive council, who were not disposed to give up their authority and 
privileges. The House presented an address to him, urging him to 
take measures to establish responsible government, but he replied 
that the act conferring the constitution contained nothing to sanction 
such a course and that he was unable to do anything without the 
permission of England. He agreed, however, to add three members 
of the House to the executive council, the three patent members of 
that body expressing themselves as willing to retire, on condition 
that suitable pensions were provided them. Three members of the 
House were accordingly sworn in as members of the executive council 
and therefore as responsible advisers to the governor, but after a few 
weeks’ trial resigned. They assigned as reason for their resignation 
the fact that the acting governor had not called upon the patent 
members of the executive council to resign. He, in his turn, defended 
his action by saying that no pensions bill had been passed and it was 
impossible for him to turn his old advisers adrift. A conflict ensued 
between the administration and the assembly which resulted in a 
victory for the assembly. A bill was passed for the establishment of 
a ministry responsible to the House, and it was approved by the 
Home Government in a dispatch written by the secretary of state on 
December 8,1854, but on condition, as will be seen from the following, 
that the retiring officials be pensioned at the expense of the colony: 

I have taken the earliest opportunity of informing you that Her 
Majesty’s Government have no objection whatever to offer to the 
establishment of the system known as “responsible government” in 
New Zealand. They have no reason to doubt that it will prove the 
best adapted for developing the interests as well as satisfying the 
wishes of the community. Nor have they any desire to propose 
terms or to lay down restrictions on your assent to the measures which 
may be necessary for that object, except that of which the necessity 
appears to be fully recognized by the General Assembly—namely, the 
making provision for certain officers who have accepted their offices 
on the equitable understanding of their permanence, and who now 
may be liable to removal. ( a ) 

Pension Act of 1856. 

At the first session of the second Parliament, which met on April 
15, 1856, the first business taken up in both the House and legislative 
council was, accordingly, the formation of a responsible ministry. 

a New Zealand Parliamentary Debates, Second Parliament, 1856-1858, p. 13. 




214 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


It was stated in Parliament that the great boon of responsible govern¬ 
ment could be secured only at some expense to the colony; that is, 
by payment of pensions to existing holders of office in order to allow 
of the new executive taking the practical administration of affairs. 
It was explained that the governor, in imposing that condition, was 
the mere agent of imperial authority and acting according to in¬ 
structions from which he could not depart. ( a ) 

The first business before Parliament, therefore, was consideration 
of the proposed pensions bill, a measure which provided for buying 
off the old officials who had been appointed to their positions by the 
ruling powers in England. These were only three in number, the 
colonial secretary, the colonial treasurer, and the attorney-general, 
but pensions were not granted to them without debate, as it was con¬ 
tended by certain members of the House that these officials had not 
administered their offices so as to conduce to the welfare of the colony 
but the contrary, and that “ retiring officers should be treated ac¬ 
cording to their deserts.” Doctor Featherston, member from the 
city of Wellington, declared: 

If, too, these pensions were granted, where was the House to stop ? 
Ought not every individual who had been or was liable to be dis¬ 
missed to be provided for in the same way? If these officials had 
any claim it was against the Colonial Office, whose servants and 
tools they had been; and, if there was one doctrine against which 
more than another the House was called upon to protest it was that of 
vested interests. If not guarded against, it would creep in at every 
point, till it imposed a burden that would be absolutely ruinous. ( b ) 

In reply to this Mr. Sewell said that, 

His honorable friend, the member for Wellington city, had exag¬ 
gerated the question before them by treating it as if it were, or as if 
it comprehended, some important general principle whether pensions 
should be granted to all officials on their having to retire on the 
introduction of responsible government. In voting for these pen¬ 
sions he should not vote for any such principle, and he had never 
placed it before the House in that light. Instead of placing the 
question on stilts in this way—instead of making it a grand question 
of constitutional principle—he had brought that subject before the 
House as a motion of practical business, on the ground that his 
excellency was under the impression—it might be an erroneous one— 
that he was bound, as the representative of the Home Government, 
to protect the interests of the gentlemen holding these offices, and 
to insist that, before removing them to make way for responsible 
officers, some provision should be made for them.( b ) 

After considerable debate the bill pensioning the three officials was 
passed, although nearly all who took part in the discussion dis¬ 
claimed the notion that “ because a man had for many years received 
a large amount of public money, therefore he should receive a pen- 

a New Zealand Parliamentary Debates, Second Parliament, 1856-1858, p. 13. 

& Idem, p. 25. 



CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 215 

sion on retiring or being displaced/’ and agreed to the measure 
merely as a means to an end. 

Pension Act of 1858 (the First General Pension Law). 

Despite Mr. Sewell’s assertion that the general principle of grant¬ 
ing pensions to retiring officials was in no way involved in the passage 
of the Pension Bill of 1856, we find that only two years later a gen¬ 
eral pension system for the benefit of “any one in the civil service 
except extra clerks’’ was inaugurated. The Act of 1858 provided 
for retirement on annuity “in case of incapacity by age, ill-health, or 
other infirmity after ten years of faithful and diligent service. If 
the term of service had been ten to seventeen years, the annual 
allowance was one-fourth of the employee’s average salary for the 
last three years. From seventeen to forty-five years the pension was 
one-third of such salary plus one-eighty-fourth of such salary for each 
year of service above seventeen. For forty-five years or more of 
service the allowance was two-thirds of the said salary. In the dis¬ 
cretion of the governor in council, relief up to one year’s salary 
could be granted the widow or family of one dying in the employ of 
the general Government.” 

Reorganization of Civil Service and Pension Act of 1866. 

Under the terms of a civil service act passed in 1866, changes were 
made in the provisions for grant of pensions to civil employees. 
This act was designed to provide for the organization, classification, 
and regulation of the civil service. Government employees were 
divided into five classes, appointments being made to the lowest 
class on probation. Examinations were provided, but they were not 
competitive. Promotion was made to depend on seniority in office, 
so far as that principle could be followed without detriment to the 
service, but the governor was authorized to appoint any one to a 
vacancy if he stated his reasons to the general assembly. Dismissal 
depended on the will of the executive. The allowance on retirement 
granted under this bill reflects the influence of the British Superan¬ 
nuation Act of 1859. It was fixed at one-sixtieth of the average 
salary (of the three preceding years) for each year of service, eleven- 
sixtieths for eleven years’ service, twelve-sixtieths after twelve years’ 
service, etc., up to forty-sixtieths, or two-thirds pay, after forty years 
or more of service. 

Abolition of Civil Pensions in 1871. 

Those sections of the Civil Service Act of 1866 which provided for 
pensions were repealed in 1871 as applied to persons coming into the 
the service after that date; in other words, the pension system as a 
system was abolished, though pensions continued to be paid to those 
whom the colony had contracted to pension under the acts of 1858 


216 CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 

or 1866. The report of the actuary on the prospective superannua¬ 
tion bill in November, 1907, shows that there were still 132 retired 
civil employees on the pension fund at that late day, and 86 pros¬ 
pective ones. ( a ) The pensions paid in 1906 amounted to over £25,988 
($126,471), the gratuities to £8,377 ($40,767), the compensations to 
£7,792 ($37,920). ( * 6 ) 

The system was abandoned in 1871 because Parliament saw that 
the amount paid in pensions, though extremely small, was rapidly 
increasing proportionately. In eleven years it went up from about 
£160 ($779) to about £7,400 ($36,012), and there was fear that it 
might double itself in a very few years. ( c ) This opposition to the pen¬ 
sion system because of its growing expense had undoubtedly unusual co¬ 
gency in the year 1871, a memorable year in the annals of New Zealand. 
There was no money in the treasury for expenditure on future devel¬ 
opment, much less on pensions for past services. The total European 
population of the colony was then only 266,986 in number and the 
total value of exports only a little over £5,000,000 ($24,332,500), 
more than half of which was gold. The colony was staggering under 
the effects of a fierce and devastating war with native tribes. One 
historian of New Zealand writes: “The characteristic feature in 1871 
of colonization in New Zealand, as a whole, was stagnation. Industry 
languished; capital was withheld; property was depressed; employ¬ 
ment, except in the gold fields and in their vicinity, was difficult to 
be obtained; and the scanty population attached to the soil was 
altogether inadequate to the development of the resources of the 
country.” It is not surprising that the legislature should have 
regarded with disfavor a system of retiring public officials that 
promised to make increasing claims on a treasury already bare. 

Another objection urged against the pension system was the fact 
that it made retrenchment in government work very difficult, a con¬ 
sideration that reflects a very interesting phase in the development 
of New Zealand. The decade of 1870-1880 is especially noteworthy 
in the history of the islands because of the development during that 
period of the public works policy, which resulted in the unification 
of the colony and the doubling of the population. The public debt 
amounted at that time to about £7,000,000 ($34,065,500) and a large 
part of it had been spent in public works, but it had been raised on 
the credit of the provincial legislatures only. This experience had 
been sufficient to teach legislators that flexibility in the civil service 
was very advantageous when the Government was carrying on a 
vigorous system of public works. Frequently the exigencies of the 
task required that the service be temporarily increased or decreased. 

a Report on Public Service Superannuation Bill, 1906. Minutes of evidence, p. 6. 

6 Idem, Appendix, p. 24. 

c Second Report of Royal Commission on Superannuation in the Civil Service, 1903. 
Minutes of evidence, p. 116. 



CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 217 

Any system which seemed to interfere, either legally or morally, with 
a rather rapid reduction in the number of civil employees, when 
necessary, was unpopular with members of the legislature. It was 
natural, therefore, when entering on an enlarged policy of public 
works that they should be inclined to express their disapproval of a 
system which might hamper the effective execution of that policy. 

It was contended also by some members that it was the business of 
the Government to pay adequate salaries, but not to support its em¬ 
ployees in old age. This theory of independent contractual relations 
prevailing in debate, the pension system was abandoned, saving the 
rights of existing employees. Lump sums were to be bestowed on 
retirement either as gratuities in recognition of long service or com¬ 
pensation for loss of office, but no more yearly pensions were prom¬ 
ised to those entering the service. 

COMPULSORY SAYINGS SCHEME, 1886 TO 1893. 

Reasons for Adoption of the Scheme. 

Great industrial changes took place in New Zealand between 1871, 
the date of the abolition of the civil pension system, and 1886, the 
year of the next legislation affecting civil employees. At the close of 
the decade of road, railway, and bridge making, New Zealand found 
itself with a great public debt, four thousand miles of telegraphs, 
eleven hundred miles of railways, and innumerable new roads and 
bridges. A period of profound business depression followed, in which 
the government service suffered with the rest of the colony. Even 
the gratuities and compensations granted civil employees were felt to 
be too great a charge for the overburdened public to bear. When, 
therefore, the civil-service reform bill was drawn up in 1886, a clause 
was inserted providing that civil employees should be required to set 
aside 5 per cent of their salaries, which should be returned to them 
with interest on their retirement from office. The compulsory sav¬ 
ings scheme was purely a move in the interests of the taxpayer. It 
was to be supposed, of course, that the employee who received his 
savings in a lump sum, on leaving the service, would be less disposed 
to ask for a gratuity or compensation than the one who found himself 
entirely without funds on retirement from office. 

This reform bill was intended to supersede the Civil Service Act of 
1866, which was supposed to give the Government control of the civil 
service, but which had remained a dead letter on the statute books. 
The reform measure made explicit provision for the appointment, 
classification, dismissal, and retirement of civil employees. The 
clause providing for compulsory savings read as follows: 

Out of the salary of every civil servant hereafter appointed there 
shall be deducted the sum of five per centum per annum, which said 
sum shall be paid into a separate fund to the public trustee, to be 


218 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


invested at interest on such security as the Public Trust Office shall 
approve. It may invest the same along with other sum or sums, but 
a separate account shall be kept for the amount paid to the credit 
of each such officer. (°) 

It should perhaps be explained that the public trustee in New 
Zealand is an officer who administers all trusts placed in his hands 
under the Public Trust Act of 1872. The functions of the public 
trustee are very extensive, and include the care of estates of intes¬ 
tates, of lunatics, and of the natives of the colony, as well as of 
ordinary people. The object of the act was to relieve persons from 
being obliged to burden their friends with the responsibility of acting 
as trustees. Many owners of property avail themselves of the act. 
The Public Trust Officer never dies, never leaves the colony, never 
becomes insolvent. The office enjoys great popularity, and no fault 
could be found with the provision for placing the savings of the civil 
employees in the hands of the public trustee to be administered in 
the same way that he administered other trust funds. He invested 
it in ways he thought best, subject to the provisions of the act, lend¬ 
ing it to the Government, to municipalities, and harbor boards, and 
investing it in mortgages. When the employee left the civil service 
the amount, of his accumulations was returned to him with interest. 

This new method of providing for retiring officials met with the 
general approval of the legislature. The object of the bill was plainly 
declared to be retrenchment in the civil service. Mr. Cowan, a mem¬ 
ber of the House, said: 

This bill is the carrying-out of a pledge made by the premier some 
time ago, that he would endeavor to reduce the cost of the civil 
service by from £30,000 to £40,000 ($145,995 to $194,660). I com¬ 
mend him for his endeavors, and I believe that, after this bill is 
amended in committee, it will have an effect, and a considerable 
effect, in that direction. ( 6 ) 

Very little opposition was expressed, and that was mild. Mr. 
Conolly, of the House, complained that the clause seemed to mean a 
general reduction of salaries. Said he: 

It must be remembered that it amounts to a reduction on all 
salaries of 5 per cent. I do not say that there is anything wrong in 
this provision, making a reduction in salaries by way of securing a 
pension or retiring allowance, and I believe, as the premier says, it is 
adopted in many large concerns. I think it exists in some of the 
English railway companies, and I do not think it is a bad plan at all. 
But I say the immediate effect is to reduce every man’s salary by 5 
per cent, and that, to those who have had no increase for a number of 
years is a species of injustice. ( c ) 


“New Zealand Parliamentary Debates, vol. 55, p. 372. 
b Idem, p. 381. 
cldem, p. 376. 



CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


219 


In the legislative council Mr. Bonar contended that the provision 
should be amended so as to enable officers who had made arrange¬ 
ments with a life insurance office to be exempt from the payment of 
the 5 per cent, as they would still have to keep up their premiums. 

Mr. Hatch of the House wished to limit the deduction to salaries 
above a certain amount, but held that the civil service was too well 
treated as it was, and that the principle of deductions was, therefore, 
quite proper in the interest of the colony. Said he: 

I do not see how it [the deductions] can be taken off salaries of £40 
to £50 ($195 to $243) a year; but when the salary rises to, say, £150 
($730) a year there is no reason why the recipient of that salary 
should not pay to a fund to provide something for himself when he 
retires from the service. In fact, I do not see why we should not 
bring the civil service down to the position of the merchant service. 
If an employee who has been a long time in the latter service gets a 

E resent of £100 or more on retiring, his employer considers that he has 
een very liberal; but we see parties leaving the former service who 
have been in the receipt of £500 or £600 ($2,433 or $2,920) for years, 
and who get their thousand pounds or more when they retire. The 
sooner we bring the civil service to the position of the merchant service 
the better will it be for the colony, and the better we shall be served. (°) 

In answer to this, another member of the House, Mr. Gore, said: 

I think the principle of clause 11 is very good. A previous speaker 
has said that the civil servants are very well able to look after them¬ 
selves—and no doubt any man of fair education and good common- 
sense is able to take care of himself. But we have a duty to our¬ 
selves, and, although there may be many of the civil servants able to 
take care of themselves, there may be many others who are not provi¬ 
dent enough to do so. I am not one of those who wish to see salaries 
reduced beyond what is a fair remuneration for a fair day’s work. I 
think there are many of them who are paid too little, and possibly 
there may be some who are paid too much. ( b ) 

With this limited discussion the compulsory-savings clause in the 
civil service reform bill was passed and became a law. While it 
appears to have been satisfactory to a certain extent, it was apparent 
that, for the good of the service, other or additional legislation was 
necessary. It afforded no adequate provision for employees who 
might live many years after retiring from the civil service. The 
obvious complement of the scheme, a system of deferred annuities 
bought with the savings of the employees, is said to have been re¬ 
garded with distrust, owing to the fact that New South Wales had 
inaugurated a scheme with some such provisions in 1884, and while 
the faults of that plan were not generally understood, nor the reasons 
for its failure, it was believed in New Zealand, a few years after its 
inception, that the fund was hopelessly insolvent. ( c ) 


a New Zealand Parliamentary Debates, vol. 55, p. 376. 
b Idem, p. 378. 

c Report of Royal Commission on Superannuation in the Civil Service. 1903. 
Minutes of evidence, p. 116. 



220 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


Need of a Proper Superannuation System Recognized. 

The way in which thoughtful students of political institutions in 
New Zealand took note of the civil service’s need of a proper super¬ 
annuation scheme and the inadequacy of the existing law is well 
shown in the last chapter of Mr. William Gisborne’s work entitled 
The Colony of New Zealand, published first in 1888 , only two years 
after the passage of the civil service reform bill. As Mr. Gisborne 
had been previously a member of the House of Representatives and a 
Responsible Minister, his words may be taken as those of one who 
spoke with authority. Said he: 

The civil service is an important factor in the work of representa¬ 
tive institutions. Under the system of responsible government, 
which, in the case of British colonies is the outcome of those institu¬ 
tions, the civil service should, of course, be adapted to that system. 
It is very questionable whether under any system a civil service 
should, in the public interests, be in its personal composition change¬ 
able according to the changes of political parties in power. But under 
responsible government such periodical changes of persons employed 
in the civil service would be absurd, and most mischievous. Respon¬ 
sible government means that Ministers, the responsible officers of the 
Crown, assume and resign office practically at the will of a majority 
of the representatives of the people. Necessarily, therefore, at cer¬ 
tain times, often at no distant intervals, ministers undertake the 
charge of executive departments, with the administrative work of 
which they are more or less unacquainted, and when, as during 
session, their time is absorbed by parliamentary work. It is indis¬ 
pensable then that there should be in each department permanent 
public servants, who are fully acquainted with their official work, and 
from whom the new ministers can at once obtain information neces¬ 
sary both for political and administrative purposes. Moreover, these 
permanent officers continue to carry on uninterruptedly the routine of 
public business. It is also necessary for the public good that these 
officers should be disconnected from political partisanship, and be 
loyal in respect of public business to each successive ministry. They 
should not be disqualified from voting at elections, but they certainly 
should not be allowed to take up active political positions in other 
respects. It is only in these ways that, under a system of responsible 
government, the civil service can become adapted to that system, and 
the public interests in all administrative work be best promoted. 

These indispensable conditions of a civil service under a system 
of responsible government give a specialty to that service, and render 
its treatment one altogether distinct from that applicable to the 
private staff of a mercantile or financial establishment. Those who 
argue that Ministers of the Crown should be able to deal with the 
appointment, removal, and promotion of public servants just in the 
same way that the head of a firm would deal in those respects with his 
clerks, forget that those Ministers are only ephemeral representatives 
of political parties, and that they are dealing with matters not per¬ 
sonally their own, while heads of firms are in both respects on a 
totally distinct footing. The adoption in the civil service of the 
practice in these respects by private firms would be disastrous to 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


221 


public interests. Civil servants are not the personal servants of the 
Ministers of the day, but are the servants of the public, independently 
of political parties. It is in the public interests that these servants, 
while they are subject to rules which insure discipline and abstinence 
from active participation, beyond voting, in political struggles, 
should have held out to them some reasonable prospect of continuity 
of office, except in cases of misconduct, and thus secure to the public 
the growing advantage of their cumulative knowledge and experience. 
In this view it is not the Ministry, and it is not the civil service itself, 
which should be specially consulted, but the sole consideration should 
be what is most to the permanent advantage of the public as a whole. 
Accordingly, the problem is how, under the circumstances, public 
administration can be best conducted, and at the lowest cost com¬ 
patible with that condition. Responsible government makes this 
provision in the case of high political office; the question now is what 
to do in the case of the rank and file of the official army. 

The limitation of the number employed, the appointment of 
qualified persons, and the appropriation of salaries would rest with 
Ministers of the Crown and with the legislature, respectively. The 
proper organization of the civil service would indirectly, to some 
extent, affect these subjects, and would directly make provision on 
other subjects which essentially involve the economy and efficiency 
of public administration. Shortly, what is required, and what may 
be reasonably anticipated from proper organization, is to attract 
good men to the service, and to keep them there. For this purpose 
a system based on definite conditions which would answer that two¬ 
fold object should be devised and adopted under legislative sanction. 
Vague, fluctuating, capricious treatment of public servants is repug¬ 
nant to proper organization. Promiscuous patronage, arbitrary 
removal, and spasmodic rushes into indiscriminate retrenchment 
tend only to discouragement of good service, to the infliction of 
injustice, and, in the end, to the increase of expenditure and to the 
serious injury of public interests. 

The following principles governing the constitution and conduct 
of the civil service in New Zealand appear to me to be vital: 

First, the persons first appointed should have successfully passed 
either a competitive or a standard educational examination. 

Secondly, there should be in the service classification which would 
allow of gradual promotion in rank and in pay taking place. 

Thirdly, provision should be made for reasonable allowance in 
cases of removal from office on public grounds other than those of 
misconduct. 

Fourthly, pensions on a graduated scale should be provided, 
either by general contribution from civil servants or by the State, 
for cases of retirement from illness, infirmity, or old age. 

Fifthly, proper regulations should be made for the conduct and 
discipline of the civil service, and for the prohibition of civil servants 
taking an active part in politics beyond voting at elections. 

It is, of course, impossible to hope that rules can altogether 
provide for all possible contingencies. The object of the rules is to 
assert general principles which would lessen as much as possible 
capricious or fluctuating exercise of authority over civil servants, 
would subject them to equitable treatment, and thus tend to the 


222 CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 

greatest public advantage. At the same time it must be antici¬ 
pated that from time to time exceptional cases will occur, which 
must be dealt with exceptionally on their own merits. 

Looking at the present state of the New Zealand civil service, 
I regret that, owing to the absence of practical recognition of the 
foregoing principles, this state has been, and still is, lamentable, not 
only on account of the individuals directly concerned, but also on 
account of the public interests. It is in the latter view that this 
subject should be considered, though it is impossible to refrain from 
sorrow that a service containing a great number of able, faithful, 
and old public servants should be unjustly treated and undeservedly 
abused. The civil service seems to be kept as the scapegoat of the 
sins and misfortunes of the colony; and its home is the wilderness. 
So lately as September 10, 1890, Sir Frederick Whitaker, who has 
been in the colony since its foundation, and has continuously since 
1852 held high political position, stated, in his place in the legis¬ 
lative council, that he had for many years past carefully watched 
the civil service here and in other countries, and had come to the 
conclusion that clearly the civil service of New Zealand was the 
worst paid and the worst treated in the British dominions. This 
corroboration of my view is the more strong because Sir Frederick 
Whitaker has had unrivaled opportunity of forming a judgment on 
the subject and his impartiality can not be questioned. I am glad 
to observe that recently a civil-service association has been formed. 
So long as this body acts, as it declares its intention to do, in the 
furtherance of its public interests, in due subjection to the law and 
the regulations of the service, it may be reasonably hoped that this 
association may do much legitimately to improve the status of the 
service and to strengthen its claims to just consideration. This 
step, and the fact that many leading public men in New Zealand 
are in favor of the general principles which I have mentioned in 
relation to the civil service, and that in the latest session the House 
of Representatives sanctioned classification in the post and telegraph 
department of the service, hold out a prospect that a better time is 
coming, and that, in the interests of the public at large as well as in 
its own, the New Zealand civil service may be placed on a proper 
footing of organization and efficiency. ( a ) 

CIVIL SERVICE INSURANCE ACT, 1893. 

Main Features of the Act. 

The compulsory savings arrangement having been found inadequate 
as a retirement measure for the civil service, the Civil Service Insur¬ 
ance Act, a combined assurance and annuity scheme for the benefit of 
civil servants, was passed in 1893 and made compulsory on all new 
entrants into the service under forty years of age. This provided that 
in return for monthly deductions, amounting to about £5 ($24.33) 
annually for every £100 ($486.65) of salary, the Government Life 
Insurance Department should contract to give a uniform initial insur- 


The Colony of New Zealand, by William Gisborne, 1891, pp. 340-344. 



CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 223 

ance of £100 ($486.65), increasing with the salary until the age of 60 
was attained, and after that age an annuity varying with the age at 
entry. Those who elected to pay a small extra premium could have 
the assurance continued beyond age 60 until death. Employees who 
had been appointed under the act of 1886 and had funds accumulated 
to their credit in the hands of the public trustee, or men of a certain 
age whom it would have been hard to force to insure in this way, were 
allowed to elect whether they would go on under the old system of 
1886 or begin the new system of compulsory insurance under the act 
of 1893. 

Purpose of the Act. 

The general purpose of the act was set forth by Mr. Ward, a member 
of the House, on moving the second reading of the bill. Said he: 

Under ‘ ‘The Civil Service Reform Act, 1886,” all persons appointed 
to the civil service were required to deposit with the public trustee 5 
per cent of their salaries. Such amount was allowed to accumulate 
at interest, and remain in the Public Trust Office till the officer affected 
left the service. He thought it would be conceded that such an ar¬ 
rangement as that was a wise one, and had the effect of causing thrift 
to be practiced by those who joined the service. But, in the opinion 
of the Government, the existing measure did not go far enough. It 
contained nothing in the nature of an insurance or a pension in old 
age, and the Government were of opinion that a scneme of more 
importance should be adopted, so that there might not only be pro¬ 
vision for a civil servant’s widow in the event of his death, but that 
civil servants themselves should have an assured income to look for¬ 
ward to after retiring from the service. The Government attach 
great importance to the fact that this scheme would be self-support¬ 
ing. The amount necessary would be paid by the civil servants, 
except in one particular. In the event or incapacity, arising from no 
fault of the officer, then a retiring compensation of one month’s salary 
for each year is provided for; and there could be very little likelihood 
of anything in the shape of a large sum of money being required in 
this way. He might say that those who were being provided for 
under the measure would be treated in all respects the same as out¬ 
siders who found it desirable to patronize the Government Insurance 
Office. In fact the ordinary procedure of the office would be carried 
out by that department in dealing with insurances under this act. 
The act would only deal with those appointed under the Civil Service 
Reform Act of 1886. Those appointed prior to that act were entitled 
either to a pension or to compensation for loss of office. Those ap¬ 
pointed since the act referred to were to retire at sixty years of age; 
and he might say that provision was made in the bill to enable those 
who might receive a pension in the event of their retiring at sixty years 
of age to receive also the full amount of insurance payable to them 
even if death took place after sixty. There was no amount stated in 
the bill as actually payable in the event of death, but the intention 
was to insure one year’s salary. * * * ( a ) 


a New Zealand Parliamentary Debates, vol. 79, p. 191. 



224 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


Debate on the Bill in Parliament. 

In the debate which followed several objections to the bill were 
brought forward. It was asked whether those of the civil employees 
who had already insured their lives would have, under this bill, to 
effect another insurance, and it was explained by Mr. Ward that they 
would not be exempted if already insured in the government office 
or elsewhere, as the new insurance with that office was to be merely 
a variation of the compulsory savings arrangement under the Public 
Trust Office, and intended to take its place. 

Several members expressed alarm at the idea of civil employees 
being brought under the government insurance scheme, fearing that 
the standard of health among them might be lower than among other 
policy holders. Although civil employees were required to pass a 
medical examination before joining the service, it was feared that the 
health of many might have deteriorated since such examination and 
the interests of other policyholders would therefore be jeopardized, 
if such persons were accepted by the Life Insurance Department on 
terms other than thos.e on which ordinary insurers were admitted. 
An interesting section in the act gave the government power to 
bring in certain classes of people under the terms granted to civil 
servants, provided two-thirds of their number asked for it. The 
classes of Government employees thus privileged were— 

(1) All members of the police force. 

(2) All school-teachers under the “Education Act, 1877.” 

(3) All women and girls employed in the telegraph or telephone 
service of the Government. 

(4) All persons permanently employed in the Government printing 
office. 

(5) All housekeepers, messengers, and gardeners in the permanent 
employment of the Government. 

(6) All wardens of prisons, lunatic asylums, or sanitarium attend¬ 
ants, criers of court, bailiffs, post-office distributers and telegraph 
messenger boys, light-house keepers, boatmen, laborers, and other 
persons in the permanent employment of the Government. 

(7) All clerks, artisans, workmen, and other persons in the tem¬ 
porary employment of the Government. 

(8) Officers, noncommissioned officers, and men of the defense 
force. 

It was feared by some that to admit such bodies of public em¬ 
ployees en masse into the privileges of the Government Life Insurance 
Department was an unwise procedure. The reply to these objections 
made by Mr. Ward in support of the bill, which voiced the view that 
eventually prevailed, is recorded as follows: 

He might say at once that, in the event of an officer who was 
desirous of coming under this measure being in a very bad state of 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


225 


health, and shortly expected to die, he would not be allowed to trans¬ 
fer, because the Government Insurance Department could not be 
expected to have its benefits shared by persons who were really known 
to be in such a state of health that no office would accept them; and 
that was only fair and proper. Upon the whole, the Government 
Insurance Department would accept without fresh medical certifi¬ 
cates the whole staff of any department that applied to come under 
the bill, for the simple reason that every officer who now entered the 
civil service had to obtain a medical certificate before he was allowed 
to come in, and it was within the knowledge of officers that there 
were candidates refused entirely on the score of weak health. That 
being so, he thought it might be accepted pretty generally that the 
bulk of the civil servants of New Zealand were in very excellent 
health. He could only say, speaking from a short experience of the 
present system, that there had not been many cases of death. How¬ 
ever, this scheme had received the very close attention of the Gov¬ 
ernment Insurance Department, and they found that, provided the 
scheme were made to embrace a whole department, the basis would 
be so broad that they would be quite justified in taking the bulk of 
these people in. * * * It was not desirable, if a few officers alone 

applied, to admit them, as the honorable gentleman had indicated. 
The very thing which other honorable members were so anxious to 
prevent might then possibly take place. Neither ought they to admit 
cases that would be refused by other offices on the score of health. 
The safety of the thing consisted in the officers of any department 
coming in in a body. This was a very important point, and he might 
say at once that the Government would not alter the bill in this 
respect. He felt sure the officers of the departments would be very 
glad to take advantage of these provisions, and, by obtaining the 
two-thirds majority, they could, as a body, come under the act. 
* * *.(«) 

It should be explained that the New Zealand Government Life 
Insurance Department had been established in 1869, at a time when 
the failures of two well-known British offices had drawn public atten¬ 
tion to the need of greater security in life assurance. The manage¬ 
ment of the department is vested in an officer called “The Govern¬ 
ment Insurance Commissioner/ ’ who is appointed by the governor on 
the recommendation of the Minister of the day. The department is 
conducted almost exactly on the same principles as those generally 
adopted by private mutual life insurance offices. All the usual classes 
of policies are issued to those who can pass the customary physical 
examination, and the colony is vigorously canvassed by traveling 
agents in search of new business. 

The people of New Zealand took great interest in the department 
from the start. It has easily distanced all competitors. Its life- 
insurance business is almost as much as that of all of its ten com¬ 
petitors together. The people are said to prefer the government 
insurance because it has the guaranty of the Government behind it, 

a New Zealand Parliamentary Debates, vol. 79, pp. 194, 195. 

35885—S. Doc. 290, 61-2-15* 




226 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


because the rates are lower than in ordinary private companies, be¬ 
cause its policies are incontestible and nonforfeitable, and because 
the profits of the business go to the insured. This state life insurance 
was not compulsory in the beginning for any class of citizens, but the 
act of 1893 made it compulsory for civil employees under forty years 
of age in lieu of a civil pension scheme. In case of leaving the public 
service an employee could surrender his policy and get a surrender 
value. Under no condition had he to forfeit the surrender value of 
his policy, even if dismissed for misconduct. The insurance depart¬ 
ment has from the first made the best possible terms to members of 
the civil service, so that they have enjoyed an advantage, in that 
respect, over the outside public. The money for the premiums is 
collected in the cheapest and easiest manner possible. It is simply 
deducted from the salaries by the proper government officials in the 
course of keeping their routine accounts and it is then handed over 
in a lump sum to the Government Life Insurance Department, which 
can thus easily afford to make especially favorable rates to the civil 
employees, since it has no commissions to pay for securing the 
business. 

• Criticism of the Act. 

The Insurance Act of 1893 does not seem to have been sufficient, 
however, as a substitute for a retirement plan. It can easily be seen 
that the price of endowment assurance is so high as to make it of 
little use to the civil employee of small salary as a means of furnish¬ 
ing him with an adequate retirement allowance. 

The inadequacy of the endowment assurance as an old-age allow¬ 
ance made it necessary for the Government to supplement this pro¬ 
vision, in a great many cases, with gratuities and compensations. 
The custom obtained of granting a gratuity to men who had been a 
long time in the service, especially prominent and useful employees, 
when they went out, six months’ and sometimes a year’s salary. 
This was done by special act of legislature, but the law of 1893 pro¬ 
vided distinctly for granting an employee who became permanently 
incapacitated through no fault of his own a sum equal to one month’s 
salary for each year of service. This allowance on account of in¬ 
validity was entirely separate from the annuity which came to him 
on reaching the age of 60. Under these terms a civil employee who 
became incapacitated from further work at the age of 57, 58, or 59 
was in a much better financial position than one who kept his health, 
as he received a large lump sum, and at the age of 60 a regular an¬ 
nuity also. 

The law was considered faulty, as it made no provision for widows 
and orphans except in the case of people who were killed in the serv¬ 
ice. If an employee under 60 years of age were killed at his work, his 
family received not merely his insurance but a gratuity also based on 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND 


227 


his length of service. In many cases also of natural death special cir¬ 
cumstances made it seem necessary to vote the widow a “ compas¬ 
sionate 7 ’ allowance. 

A complete summary of the compensation, gratuities, and pensions 
paid yearly from 1858, the date of the inauguration of the first pen¬ 
sion system in the colony, until 1907, the year when the Public 
Service Superannuation Act was passed, was made by Mr. Morris Fox, 
the actuary of the Government Life Insurance Department, who ex¬ 
tracted this information from the journals of the House of Repre¬ 
sentatives. It will be seen that all the payments for pensions, gra¬ 
tuities, and compensation totaled for the year 1906-7 the large sum 
of £42,157 ($205,157). The summary is as follows: 

SUMMARY OF COMPENSATION, GRATUITIES, AND PENSIONS, 1859 TO 1907. 

[From Report on Public Service Superannuation Bill, 1906, Appendix 6, p. 24.] 


Financial year. 

Compensa¬ 

tion. 

Gratuities. 

Total com¬ 
pensation 
and gratu¬ 
ities. 

Pensions 
under Civil 
Service Acts. 

1859-60. 




$907. 76 

1860-61. 


$2,189. 93 
1,946. 60 

82,189. 93 

1,168.14 

1861-62. 


1,946.60 

1,630. 78 

1862-63. 


2,877.32 
2,141. 22 

2 , 877. 32 
2,141. 22 

1,791.58 

1863-64. 


1,791.89 

1864-65. 


T, 963. 53 
10,655. 89 
12,328. 43 

1865-66. . 


5,775.60 

5,775.60 

1866-67. 


4,331.19 
3,437.63 
601.42 

4 , 331.19 
10,191.32 

1867-68. 

$6,753.69 
35,657. 50 
5,033. 95 
7,157. 79 

13,790. 67 
25,486. 95 
28,524. 87 
31,210. 69 
34,164. 51 

1868-69. 

36,258. 92 

1869-70. 

4,743. 21 
4,014.86 
12,394. 06 
4,118. 80 
13,173. 35 
7,202. 42 
14,721.16 
8,597. 48 
5,718. 14 
3,284. 89 
13,293. 65 
9, 752. 99 

9,777.16 

11,172.65 

1S70-71. 

1871-72. 

12,917. 21 
7,627. 39 
1,422. 76 

25,311.27 
11,746. 19 

1872-73. 

35,958. 24 
41,672. 69 
40,152.07 
39,191. 53 

1873-74. 

14,596.11 
8,044. 32 
14, 786. 05 
14,238. 38 
9,397. 21 
20,742. 95 
16,447. 91 
102,529.51 
52,196. 27 

1874-75. 

841. 90 

1875-76. 

64. 89 

1876-77. 

5,640.90 
3,679. 07 
17,458. 06 
3,154. 26 

51,387.14 
57,374. 37 
67,418. 08 

1877-78. 

1878-79. 

1879-80. . 

62; 134. 86 

1880-81. 

92,776. 52 
37,945. 54 
6,536.18 
17,270. 22 
31,223. 04 
39,682. 33 
18,967. 00 
83,845. 01 
72,563. 81 
34,623. 26 
30,691.45 

82,700. 49 

1881-82.:. 

14,250. 73 
7, 786. 40 
13,633. 82 
14,069.25 
21,597.57 

95,512. 69 

1882-83. 

14,322. 58 
30,904. 04 
45,292. 29 
61,279.90 

94,595.31 

1883-84. . 

94,791. 05 
99,597. 57 

1884-85. 

1885-86. 

93,157. 06 

1886-87 . 

17,173. 47 
6,502. 82 
9,903. 33 
7,562. 54 

36,140. 47 
90,347. 83 
82,467.14 

96,230.17 

1887-88 . 

105,997. 32 
110,579. 21 

1888-89. . 

1889-90 . 

42,185. 80 

112,997. 74 

1890-91 . 

18,918. 52 
16,492. 63 
26,777. 92 

49,609. 97 

113,805. 76 

1891 92 . 

85,475.85 

101,968. 48 

107,911.70 

1892 93. . 

49,542. 49 
29,106. 66 

76; 320. 41 

113,152. 94 

1893 94 . 

9,871.70 

38,978. 36 

121,512.90 

1894-95. 

17,410. 82 

17,969. 55 

35,380. 37 

122,944. 66 

1895 96 . 

23,002. 20 

9,100. 36 

32,102. 56 

124,986.16 

i896-97 . 

26,900. 27 

17,425. 11 
6,279. 25 

44,325. 38 

125,154. 03 

1897 98 . 

17,165. 26 

23,444. 51 

127,232. 55 

1898-99 . 

18,427.18 

7,105. 09 

25,532. 27 

116,318.31 

1899 1900 . 

12,143. 40 

13,528. 87 

25,672. 27 

109,374. 61 

1900-1901 . 

25,057. 49 

24,741. 29 

49,798. 78 

104,022. 59 

1901 2 . 

34,298. 04 
48,684. 28 
98,427. 64 

9,158. 75 
19,052. 35 

43,456. 79 

101,201.95 

1902 3 . 

67,736. 63 

115,279. 94 

1903 4 . 

11,241.62 
16,789. 43 

109,669. 26 

111,570. 94 

1904-5 . 

89,599. 99 

106,389. 42 

115,629.48 

1905 6 . 

30,380. 69 

14,830.66 

45,211.35 
78,688. 91 

115,672. 67 

7 .. 

37,919.81 

40,769.10 

126,471. 96 



Tnt.al 


1,217,075.80 

516,848. 05 

1,733,923.85 

3,519,106. 43 



































































228 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


THE PUBLIC SERVICE SUPERANNUATION ACT, 1907. 

The Civil Service Insurance Act proving thus inadequate from the 
first as a superannuation measure, different classes of public servants 
made successful efforts from time to time to secure more satisfactory 
legislation. In 1899—only six years after the passage of the insur¬ 
ance act—the members of the police force secured the passage of a 
provident fund act which made provision for retirement on more sat¬ 
isfactory basis than that offered them under the terms of the insur¬ 
ance act. In 1902 the employees of the government railways and in 
1905 the teachers did likewise. In 1906 a “ Civil-Service Superannu¬ 
ation Bill” was prepared and referred to the public accounts com¬ 
mittee. The provisions of this measure are said to have been drawn 
up under the direction of Sir Joseph Ward, the premier, who took 
the liveliest interest in the bill. On October 24, 1906, the com¬ 
mittee recommended, in a report to the House of Representatives, 
“that the civil service superannuation bill, as submitted, or any 
other suggested scheme that will meet the position, be referred to the 
actuary for examination and investigation and that he be requested 
to furnish a full report on such scheme in time to enable it to be dealt 
with next session.” Mr. Fox, the actuary, accordingly took up the 
work and submitted, on July 3, a very full report on the bill, together 
with data and statistics relating to the civil service. As an outcome 
of his investigation he recommended the adoption of the bill on con¬ 
dition of certain modifications. The majority of the amendments 
recommended by Mr. Fox were accepted, and “Public Superannuation 
Bill, 1907,” was drafted. The actuary made a favorable report on 
this bill, and on November 25, 1907, it became a law. It was con¬ 
solidated the following year with the Public Service Classification Act 
of 1907, and the whole is now known as “The Public Service Classi¬ 
fication and Superannuation Act, 1908.” 

Superannuation Bill First Proposed, 1906. 

The special features of the present law can best be brought out by 
a review of the investigations and reports which led to its enactment. 

The benefits provided in the first bill proposed, the Civil Service 
Superannuation Bill, 1906, were as follows:( a ) 

I. On attainment of pension: Males, at age 60, or after 40 years' serv¬ 
ice; females, at age 50, or after 30 years' service: 

(a) A pension of one-sixtieth of yearly salary for each year's serv¬ 
ice, with a limit of forty-sixtieths (two-thirds) of salary. 

(b) Or the option, in lieu thereof, of a return of total contributions. 

II. On retirement before pension age (on the ground of being 
medically unfit for further duty): 

(a) At any time, a pension of one-sixtieth of yearly salary for each 
year's service, limited to forty-sixtieths. 

a Report on Public Service Superannuation Bill, 1906. Appendix 1 , p. 17. 




OIViL-SERVICE RETIREMENT IN NEW ZEALAND. 


229 


(b) Or the option, in lieu thereof, of a return of total contributions. 

III. On retirement before pension age (on other grounds than 
medical unfitness): 

(a) On ordinary dismissal or retirement, a return of total contri¬ 
butions. 

(b) On dismissal for the commission of a crime, a return of the 
balance of total contributions after any defalcations ha<ve been made 
good.' 

IV. At death: 

(а) At death before pension entered upon, leaving no widow 
(widower) or children, a return of total contributions. 

(б) At death before pension entered upon, leaving a widow (wid¬ 
ower) or children, £18 ($88) yearly during widowhood (widower- 
hood), and 5s. ($1.22) weekly for each child till fourteen years of 
age ; with the option of a return of such portion of the total contri¬ 
butions as the board thinks fit. 

( c ) At death after pension entered upon, a return of the difference 
between pension received and contributions paid to the fund. 

V. Benefits already accrued: 

(a) In addition to benefits I to IV, the bill provides that (1) moneys 
already deducted from salaries, under “The Civil Service Reform 
Act, 1886,” or “The Post and Telegraph Classification and Regu¬ 
lation Act, 1890,” shall be invested with the Public Trustee and 
become the property of the contributors on retirement; (2) life-assur¬ 
ance policies and annuities effected under “TheCivil Service Insur¬ 
ance Act, 1893,” may be kept alive or the surrender value invested 
with the public trustee for the benefit of the holders. 

( b ) The absolute or contingent rights to compensation for loss of 
office when the act comes into operation (if any) are also preserved 
until a corresponding amount of pension has been drawn. 

Note.— The pensions are payable monthly, and are computed on the salary at 
retirement, unless there has been promotion within five years, when the average 
salary for the last seven years is taken as the basis. 

To pay for these benefits the bill provided for the establishment 
of a superannuation fund made up of contributions from the 
employees, the Government guaranteeing the future adequacy of 
the fund. 

Collection of Statistics of Civil Service Made by Actuary. 

The first step taken by Mr. Fox in examining into the soundness 
of the proposed scheme was the collection of statistics regarding 
the personnel of the public service. Receiving instructions to 
include in his estimates all departments except railways and police 
and such officers of the education department as were included in 
the teachers’ scheme, he addressed a circular to all other depart¬ 
ments of the colonial government asking for information concerning 
the number, age, sex, salary, and class of employment of all persons 
in each department to whom the provisions of the bill would apply. 
This was done in order that he might make a valuation of the accrued 
liabilities, which would have to be assumed by the superannuation 
fund on the inauguration of the proposed plan. The unfortunate 


230 CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 

experience of the neighboring colony of New South Wales served 
as a warning in this respect, and the actiiar}^ of New Zealand felt 
the necessity of pointing out the importance of differentiating care¬ 
fully between liabilities that have to be assumed to cover past serv¬ 
ices—that is, provision for old employees—and those that may be 
incurred to cover future services; that is, provision for entrants into 
the service. 

The information desired was furnished respecting 5,593 persons 
among the various departments, as follows: 

TABLE SHOWING 5,593 PERSONS TO WHOM IT WAS THOUGHT THE PROVISIONS OF 
THE BILL WOULD APPLY, DISTRIBUTED AMONGST THE VARIOUS DEPARTMENTS. 


[From Report on Public Service Superannuation Bill, 1906, p. 10.] 


Department. 

Males. 

Females. 

Total 

number. 

Total sala¬ 
ries. 

Post and telegraph. 

2,275 

297 

2,572 

343 

81,622,588 

371,995 

Lands and survey. 

'324 

19 

Justice.'.. 

190 

1 

191 

228;419 
203,210 
192,884 
173,758 

Agriculture. 

182 


182 

Mental hospitals. 

268 

165 

433 

Customs. 

188 

4 

192 

Public works. 

170 

5 

175 

169; 807 
151,733 

Printing and stationery. 

173 

40 

213 

Government life insurance. 

123 

12 

135 

121,390 
97,403 
96,259 

Prisons. 

120 

13 

133 

Roads. 

96 

2 

98 

Marine. 

107 

1 

108 

79,952 
76,209 
72,287 
59,512 
57,176 
57,142 

Valuation. 

77 

4 

81 

Defense. 

73 

1 

74 

Colonial secretary. 

60 

4 

64 

Public trust... 

05 

13 

78 

Land transfer and deeds registry. 

50 

1 

51 

Tourist and health resorts. _... 

43 

5 

48 

48,772 
47,838 
46,811 
45,326 
44,991 
44,378 
41,604 
39,784 
31,910 
30,085 

26,698 
23,116 
18,298 
17,300 
16,926 
15,159 
14,994 
8,322 
7,105 
5,801 
5,791 
4,915 
4,258 
4,020 
2,555 

Native. 

32 


32 

Mines. 

39 


39 

Labor. 

43 

4 

47 

Audit. 

40 

2 

42 

Land and income tax. 

42 

2 

44 

House of Representatives. 

30 

6 

36 

Treasury. ..*.. 

37 

7 

44 

Public health. 

22 


22 

Inspection of machinery. 

24 

1 

25 

Education (excluding'those coming under “The teachers’ 
superannuation act, 1905”. 

25 

13 

38 

Stamps.!. 

22 

4 

26 

Crown law. 

7 


7 

State fire insurance. 

25 

2 

27 

16 

19 

Registrar-general. 

16 


Advances "to settlers. 

19 


Old-age pensions. 

18 


18 

5 

Legislative council. 

5 


Hospitals. 

2 

1 

3 

Electoral. 

5 

5 

Friendly societies. 

4 

1 

5 

Land for settlements. 

2 

2 

Industries and commerce. 

2 


2 

Colonial museum. 

3 


3 

Native land purchase. 

1 


1 




Deduct 86 civil servants entitled to pensions under civil serv¬ 
ice acts and not eligible under the present bill. 

5,049 

86 

630 

5,679 

86 

4,428,481 

164,819 



Total. 

4,963 

630 

5 593 

4,263,662 




Assuming that the 5,593 persons referred to would all have been 
eligible as members of the fund if it had come into operation at the 
time the statistics were collected, it was necessary to value the liabil¬ 
ities resulting from the application of the proposed contribution rates 












































































CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


231 


and retiring benefits to those 5,593 persons. With great care Mr. Fox 
explained the assumptions made and the statistical foundations of the 
calculations on which this valuation rested. Here again he seems to 
have been mindful of the experience of the actuaries of New South 
Wales whose explanations and warnings in connection with the super¬ 
annuation account of that colony were so disregarded, for he wrote: 

‘ ‘ I feel tills to be all the more necessary because, unfortunately, I am 
aware that the use of recognized actuarial methods, though admitted 
in smaller matters, is viewed with disapprobation and absolute sus¬ 
picion by many people when applied to the investigation of certain 
complicated statistical and financial matters, although these matters 
peculiarly depend for their ultimate success on a proper treatment 
of problems involving a reasonable estimate of many probabilities— 
of life and death, widowhood, orphanhood, bachelorhood, increases in 
salary, and retirement from service—all these being spread over a long 
series of years and combined with the interest-earning power of 
money. While it is impossible in individual cases to make an accu¬ 
rate estimate of such matters, it is found that in a large body of per¬ 
sons the numbers living, dying, or doing acts within their own control, 
such as resigning or marrying, are singularly constant from year to 
year.” 

The rate of interest assumed by Mr. Fox in his calculations was 
4 per cent, and he stated it as his opinion that the Government should 
guarantee that rate of interest on the fund, as is done by many of the 
British railway companies in their pension schemes. He thought that 
the fund would probably be able to earn more than 4 per cent for some 
years, but held that without a guarantee it would not be justifiable to 
assume so high a rate as 4 per cent over a long period of time. 

The mortality table used by Mr. Fox as a basis for calculating the 
longevity of the civil servants, and considered by him particularly 
appropriate to a New Zealand fund of this description, was Dr. Farr’s 
table relating to certain healthy districts in England. For chil¬ 
dren’s annuities he used the mortality experience of the children 
of a large body of Scottish Presbyterian ministers, which was inves¬ 
tigated by Mr. Archibald Hewat in 1902. The probabilities of leav¬ 
ing children, with their ages, were taken from the New Zealand popu¬ 
lation returns from 1895 to 1899. The probabilities of leaving a 
widow or dying unmarried were derived from English census statis¬ 
tics utilized by Mr. George King in his investigation relating to family 
annuities. The ages of widows at death of husbands were taken from 
the scale adopted by Mr. H. W. Manly in his “Hypothetical Expe¬ 
rience (1903).” 

The average retirement age was assumed to be 61 for men, 51 for 
women. The optional age provided in the bill was 60 for men, but 
Mr. Fox assumed that many would not retire until after that age, 


232 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


thus making the average age later than 60. At the same time, since 
they would be allowed to retire as a matter of right before reaching 
the age of 60 when they had served 40 years, or, with the consent of the 
board, after 35 years, it would follow that all who joined the service 
before reaching the age of 20 would be able to retire on a pension 
between the ages of 55 and 60, and some of them between the ages of 
50 and 55. The bill made 50 the optional age of retirement for 
women, or earlier if they had had 30 years’ service. Considering all 
these circumstances the assumption that men would retire at the 
average age of 61, women at the average age of 51, seemed to Mr. 
Fox to be reasonable. 

Having no data to work on, the actuary found himself unable to 
estimate the probable strain on the fund due to premature retire¬ 
ments on pension through physical disability. For the same reason 
he was unable to compute the relief that would probably ensue from 
those voluntarily retiring and leaving the interest on their accumula¬ 
tions in the fund. He assumed, however, that these two uncertainties 
would counteract each other, and though he said he could not speak 
confidently on that matter, he gave it as his opinion that the balance 
on either side would be immaterial. The uncertainty on these 
points convinced him, however, of the necessity for periodical inves¬ 
tigations of the progress of the fund. 

The final assumption made by Mr. Fox was in regard to the rate of 
salary increases from age to age. It is plain that the contributions 
and benefits (except those payable to widows and children) and the 
valuation of them depend on the amount of salary received, taking 
into account prospective increases in salary. The average salary 
received at each age at the present time was deduced by Mr. Fox 
from the data furnished him by the departments, and these average 
salaries were then graduated to remove irregularities. The present 
salary of each person was then assumed to increase from age to age in 
the same ratio as that of the graduated scale. The average and 
graduated salaries for men and women were shown to be as follows: 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 233 


AVERAGE SALARY RECEIVED AT EACH AGE AT THE PRESENT TIME, AND THESE 
AVERAGE SALARIES GRADUATED TO REMOVE IRREGULARITIES. 


[From Report on Public Service Superannuation Bill, 1906, p. 12.] 


15. 

16. 

17. 

18. 

19. 

20 . 
21 . 
22 . 

23. 

24. 

25. 

26. 

27. 

28. 

29. 

30. 

31. 

32 

33 

34 

35 

36 

37 

38 

39 

40 

41 

42 


Age. 


Aver¬ 

age 

salary. 


Gradu¬ 

ated 

salary. 


Age. 


Aver¬ 

age 

salary. 


Gradu¬ 

ated 

salary. 


Age. 


Aver¬ 

age 

salary. 


Gradu¬ 

ated 

salary. 


MALES. 


males— con¬ 
cluded. 


females— con¬ 
cluded. 


$157 

240 

242 

266 

300 

379 

432 

485 

530 

564 

603 

660 

670 

726 

799 

791 

821 

794 

844 

862 

856 

970 

912 

952 

1,025 

1,063 

1,028 

1,136 


$170 

204 

243 

285 

328 

375 

423 

467 

516 

565 

611 

659 

696 

728 

759 

784 

804 

830 

854 

876 

900 

922 

947 

976 

1,005 

1,034 

1,068 

1,097 


43. 

$1,152 

$1,134 

44. 

1,134 

1,158 

45. 

1,192 

1,180 

46. 

1,263 

1,200 

47. 

1,141 

1,212 

48. 

1,225 

1,221 

49. 

1,458 

1,229 

50. 

1,134 

1,231 

51. 

1,216 

1,231 

52. 

1,133 

1,231 

53. 

1,207 

1,231 

54. 

1,307 

1,231 

55. 

1,276 

1,231 

56. 

1,396 

1,231 

57. 

1,185 

1,231 

58. 

1,105 

1,231 

59. 

1,244 

1,231 

60. 

1,129 

1,231 

FEMALES. 



15. 



16. 

195 

195 

17. 

195 

199 

18. 

207 

209 

19. 

219 

224 

20. 

222 

239 

21. 

273 

258 

22. 

298 

276 


23. 

24. 

25. 

26. 

27. 

28. 

29. 

30. 

31. 

32. 

33. 

34. 

35. 

36. 

37 

38 

39 

40 

41 

42 

43 

44 

45 

46 

47 

48 

49 

50 


$303 

344 

327 

348 

334 

321 

436 

393 

375 

393 

518 

382 

401 

398 

474 

456 

481 

452 


349 

427 

811 

575 

681 

414 

341 

473 

487 


$292 

310 

327 

341 

355 

369 

381 

393 

404 

414 

423 

432 

439 

448 

454 

459 

465 

473 

481 

491 

497 

502 

506 

506 

506 

506 

506 

506 


Cost of Proposed Bill Based on Statistics Collected. 

The result of Mr. Fox's valuation of the scheme proposed in the 
bill, under the conditions assumed, showed that the capital value 
of the full actuarial liability involved was £1,816,719 ($8,841,063), 
of which £1,709,582 ($8,319,681) was incurred for men, and £107,137 
($521,382) for women. Mr. Fox also computed the value of the lia¬ 
bility involved under various suggested modifications of the scheme, 
such as with the addition of annuities to widows and children of 
pensioners, with modified contributions, with half pensions only for 
back service, and with the widows’ annuities increased from £18 
($88) to £26 ($127) under all of the above conditions. He found 
that the capital value of the full liability involved ranged from 
£2,041,898 ($9,936,897) to £1,338,120 ($6,511,961), according to the 
nature of the scheme, as will be seen from the following table: 






































































































234 CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


SUMMARY OF VALUATIONS OF THE FUND OUTLINED IN THE BILL AND OF 

MODIFICATIONS THEREOF. 

[From Report on Public Service Superannuation Bill, 190G. Appendix 5, p. 23.] 


Scheme. 

X 

o> 

CO 

Present value of — 

Pensions. 

Annuities. 

Return of contributions 

at death (no widows 

and children). 

Return of balance of 

contributions over 

pensions received. 

2 

.2 

-fj 

o 

H 

OT 

P 

o 

‘43 

P 

£ 

'C 

P 

o 

o 

0> 

c 

p 

p 

>> 

4-^ 

5 

.2 

0) 

£ 

> 

(-i 

© . 
pg 

4-> .Z, 

3 

«*-» 

u 

o 

6 

> 

(H 

<D 

Xfl 

M 

3 

& 

t- 

o 

Ph 

W 

& 

o 

2 

is 

o 

E-* 

p 

Q) 

Q 

2 

2 

<0 

o 

I. With addition of 
annuities to widows 
and children.** 

II. Contributions 5, 6, 

7, and 10 per cent.** 

III. Contributions 5, 
6, 7, 8, 9, and 10 per 
cent. « 

IV. W i t h one-half 
back service only.** 

V. As in I b . 

VI. As in II b . 

VII. As in III f> . 

VIII. As in IV b . 

JM. 

IF. 

JM. 

\F 

/M. 

\F. 

/M. 

IF. 

/M. 

IF. 

/M. 

\F. 

JM. 

\F. 

/M. 
\F. 

Dollars. 
5,647,622 
503,736 

Dollars. 
4,980,011 
181,185 

Dollars. 

1,297,978 

Dolls. 

419,376 

Dolls . 
55,405 
18,191 

Dolls. 
62,783 
1,946 

Dollars. 
12,463,175 
705,058 

Dollars. 

3,624,540 

183,676 

Dollars. 

8,838,635 

521,382 

6,151,358 

5,161,196 

1,297,978 

419,376 

73,596 

64,729 

13,168,233 

3,808,216 

9,360,017 

5,647,622 
503,736 

4,980,011 

181,185 

810,472 

387,928 

55,405 
18,191 

62,783 
1,946 

11,944,221 

705,058 

3,624,540 

183,676 

8,319,681 

521,382 

6,151,358 

5,161,196 

810,472 

387,928 

73,596 

64,729 

12,649,279 

3,808,216 

8,841,063 

5,647,622 
503,736 

4,980,011 
181,185 

810,472 

387,928 

61,099 

18,916 

62,783 
1,946 

11,949,915 

705,783 

4,099,233 

193,677 

7,850,682 
512,106 

6,151,358 

5,161,196 

810,472 

387,928 

80,015 

64,729 

12,655,698 

4,292,910 

8,362,788 

5,647,622 
503,736 

2,741,499 
90,595 

810,472 

387,928 

55,405 

18,191 

62,783 
1,946 

9,705,709 
614,468 

3,624,540 6,081,169 
183,676 430,792 

6,151,358 

2,832,094 

810,472 

387,928 

73,596 

64,729 

10,320,177 

3,808,216 6,511,961 

5,647,622 
503,736 

4,980,011 

181,185 

1,874,858 

419,376 

55,405 
18,191 

62,783 
1,946 

13,040,055 

705,058 

3,624,540 9,415,515 
183,676, 521,382 

6,151,358 

5,161,196 

1,874,858 

419,376 

73,596 

64,729 

13,745,113 

3,808,216 9,936,897 

5,647,622 
503,736 

4,980,011 
181,185 

1,170,680 

387,928 

55,405 
18,191 

62,783 
1,946 

12,304,429 
705,058 

3,624,540 
183,676 

8,679,889 

521,382 

6,151,358 

5,161,196 

1,170,680 

387,928 

73,596 

64,729 

13,009,487 

3,808,216 

9,201,271 

5,647,622 
503,736 

4,980,011 

181,185 

1,170,680 

387,928 

61,099 

18,916 

62,783 
1,946 

12,310,123 
705,783 

4,099,233 
193,677 

8,210,890 
512,106 

6,151,358 

5,161,196 

1,170,680 

387,928 

80,015 

64,729 

13,015,906 

4,292,910 

8,722,996 

5,647,622 
503,736 

2,741,499 
90,595 

1,170,680 

387,928 

55,405 
18,191 

62,783 
1,946 

10,065,917 
614,468 

3,624,540 
183,676 

6,441,377 
430,792 

6,151,358 

2,832,094 

1,170,680 

387,928 

73,596 

64,729 

10,680,385 

3,808,216 

6,872,169 


a Widows’ annuities, £10 ($49). b Widows’ annuities, £26 ($127). 


It will be noted that these sums ranging, from £2,041,898 ($9,936,- 
897) to £1,338,120 ($6,511,961) include the accrued liability for back 
services and the prospective liability for future services. 

Consideration of How Cost Might be Met. 

The question to be decided was: How shall these liabilities be met ? 
There seems to have been no thought in the mind of Mr. Fox but that 
the whole of the liability for back services should be borne by the Gov¬ 
ernment, a point which does not seem to have been questioned by 
the Government. He stated it to be clearly a matter of opinion, how- 








































































CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


235 


ever, as to how much (if any) of the deferred liability should be met 
by present contributions from the Government and the deferred 
pensioners, and how much should be left to be met by the Government 
of 45 years hence; on the one hand, how much it is considered practi¬ 
cable or desirable to take in yearly contributions from the prospective 
pensioners to meet a portion of the liability when it accrues, and, on 
the other hand, what proportion (if any) of the balance of future 
liability should be met by the present, and what proportion should be 
left to the future Government. There was no suggestion on Mr. 
Fox’s part of the other alternative that the entire liability for future 
services might be borne by the pensioners themselves, a suggestion 
that would indeed have been impracticable in view of the generous 
benefits provided under the scheme. 

In the opinion of Mr. Fox, then, there were only two ways of placing 
a government scheme of deferred pensions to its employees on a sound 
footing. The one course was to exact no contribution from the pros¬ 
pective pensioners and to leave the whole of the future liability to be 
met by future generations as it accrued. This would be simply a 
straight pension such as that maintained by the British Government 
for its civil servants. Stating, however, that a contributory plan is 
generally considered more desirable than a pure pension, Mr. Fox 
insisted on the importance in such a plan of reserving and accumu¬ 
lating the contributions to meet the contributors’ portion of liability 
and not using them, in earlier years, to pay other claims which have 
not been provided for by contributions, namely, pensions to persons 
already in the service at the time of the establishment of the plan. 
He maintained that such claims should certainly be met from other 
sources as they fall in, and not discharged by using accumulations 
formed for the purpose of meeting altogether different liabilities. 
If this were done he held that the fund, assuming that it were other¬ 
wise conducted properly, would be found, at successive investigations, 
to be sufficient to meet that portion of the liability which it was 
intended to meet, and it would therefore be sound from any point of 
view. 

As for the liability on account of back services, which should be 
borne by the Government, Mr. Fox showed by the use of the following 
table of prospective pensions to men arising from the scheme con¬ 
tained in the bill how that should be kept entirely separate from the 
liability for future services to be met in part by contributions from 
the younger members. 


236 civil-service retirement m New ZEALAND, 

PROPER TREATMENT OF LIABILITIES ARISING FROM PROSPECTIVE PENSIONS 

OF MALES. 


[From Report on Public Service Superannuation Bill, 1906, p. 13.] 


Age. 

Num¬ 

ber. 

Back 

service. 

Future 

service. 

Total. 

Age. 

Num¬ 

ber. 

Back 

service. 

Future 

service. 

Total. 

SI 

1 

$224 


$224 

49. 

93 

$44,650 

$27,179 

$71,829 

80 

1 

273 


273 

48. 

85 

35,039 

22,751 

57,790 

79 

1 

2,273 


2,273 

47. 

78 

30,630 

21,106 

51,736 

78 

2 

161 


161 

46. 

84 

32,601 

27,233 

59,834 

77 

2 

399 


399 

45. 

92 

33,501 

30,523 

64,024 

76 

4 

1,226 


1,226 

44. 

85 

26,406 

29,024 

55,430 

75 

4 

4 ' 171 


4,171 

43. 

85 

27,097 

31,895 

58,992 

74 

3 

949 


949 

42. 

92 

27,554 

37,117 

64,671 

73 

7 

4,618 


4,618 

41. 

88 

23,291 

34,742 

58,033 

72 

4 

1,572 


1,572 

40. 

92 

26,766 

40,757 

67,523 

71 

7 

2,618 


2,618 

39. 

109 

29,958 

50,174 

80,132 

70. 

9 

2,073 


2,073 

38. 

101 

27,131 

46,514 

73,645 

69 

10 

3,499 


3,499 

37. 

97 

22,439 

46,047 

68,486 

68 

26 

13,183 


13,183 

36. 

107 

26,011 

57,760 

83,771 

67 

21 

9,387 


9,387 

35. 

105 

22,756 

53,259 

76,015 

66 

26 

15,787 


15,787 

34. 

102 

20,191 

55,634 

75,825 

65. 

32 

19,354 


19,354 

33. 

106 

18,877 

60,179 

79,056 

64... 

39 

15,558 


15,558 

32. 

107 

17,544 

60,938 

78,482 

63 

29 

14,171 


14,171 

31. 

139 

24,683 

87,242 

111,925 

62 

33 

13,777 


13,777 

30. 

152 

24,143 

97,676 

127,819 

61. 

31 

13,792 


13,792 

29. 

143 

20,751 

98,761 

119,512 




28 

107 

12,711 

72,248 

84,959 


292 

139,065 


139,065 

27. 

119 

1L865 

79,903 

91,768 




2fi 

136 

12,536 

97,778 

110,314 

60. 

31 

12,570 

$584 

13,154 

25. 

129 

9,446 

94,084 

103,530 

59.... 

50 

23,023 

2,073 

25,096 

24. 

132 

7,674 

100,002 

107,676 

58. 

44 

16,565 

2,433 

18,998 

23. 

117 

4,706 

93,792 

98,498 

57. . 

33 

14,200 

2,609 

16,809 

22. 

171 

3,577 

141,985 

145,562 

56. .. 

40 

19,748 

4,652 

24,400 

21. 

217 

181,720 

181,720 

55.... 

37 

19,777 

4,725 

24,502 

20. 

225 


186,552 

186,552 

54 

47 

21,223 

7,168 

28,391 

19. 

247 


185,156 

185,156 

53.. . 

58 

24,586 

9,334 

33,920 

18. 

156 


119,473 

119,473 

52.... 

62 

26,036 

10,541 

36,577 

17. 

140 


114,538 

114,538 

51. 

73 

32,382 

14,789 

47,171 

16. 

74 


71,508 

71,508 

50.. 

75 

27,491 

15,587 

43,078 

15. 

9 


6,823 

6,823 








It will be seen that if the 292 men over 60 years of age all retired 
on pension immediately the sum of £28,576 ($139,065) would be 
payable during the first year on their account. “If it be deliberately 
resolved to offer these pensions,” said Mr. Fox, “it should also be 
recognized that they constitute a present liability, and they should 
be met out of the present resources of the State.” He then showed 
how, in each succeeding year, it would also be necessary to similarly 
provide the pensions which would become due on account of back 
service to the survivors of the present members shown in the table as 
living at each age under 60 down to age 22 when the liability for back 
service would vanish. The outgo for pensions on back service would, 
of course, diminish as the pensioners died off. 

Mr. Fox showed also, from the above table, how members of the 
service who had served some time before the adoption of the proposed 
scheme would ultimately retire on pensions provided partly by the 
Government and partly by their own contributions. The seventy- 
five men shown as now aged 50 would, if they survived and remained 
ten years, be entitled to £3,203 ($15,587) a year for their future ten 
years’ service, in addition to the £5,649 ($27,491) for back service. 
These men would be contributing 10 per cent of their salaries during 
the next ten years, whereas the full rate necessary would be approxi- 





















































































































CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


237 


mately 15 per cent. Thus, two-thirds of their future-service pensions 
would have been purchased by their own contributions, if those con¬ 
tributions had been safeguarded as advocated above, leaving the 
remaining one-third of the survivors’ pensions to be defrayed by the 
Government, in the same way as the whole of the back-service 
pensions. 

The full rates of contribution necessary at various ages having 
been ascertained, it would be for the Government to say what pro¬ 
portion of these rates should b6 required from the contributors to 
the fund. The sum so contributed should be used only for the 
purpose of meeting the portions of the current and future liabili¬ 
ties for which they were intended. That part of the contributions 
intended to meet a portion of the future liability should be accumu¬ 
lated at interest and not used for any other purpose. The remainder 
of the current and future liabilities not so provided for by the contri¬ 
butions should be discharged year by year, as they accrue, by the 
Government of the day, and no portion whatever of the contributed 
fund should be used for that purpose. An actuarial investigation 
of the fund should be made triennially (or quinquennially) in order 
to test the sufficiency of the contributed fund and to ascertain the 
probable extent of the present accruing liability which will have to 
be met by the Government during the succeeding three (or five) 
years. 

The full contributions required at different ages to furnish the bene¬ 
fits given in the bill were computed to be as follows: ( a ) 


At age 18. 8.6 per cent of salary. 

At age 23. 9.3 per cent of salary. 

At age 28. 9.8 per cent of salary. 

At age 33. 10.4 per cent of salary. 

At age 38. 11.1 per cent of salary. 

At age 43. 12.1 per cent of salary. 

At age 48. 13.6 per cent of salary. 

At age 53. 15.6 per cent of salary. 

At age 58. 17.9 per cent of salary. 


The contributions in the bill were— 


At age 40 and under. 5.0 per cent of salary. 

At age 41. 6.0 per cent of salary. 

At age 46. 7.0 per cent of salary. 

At age 51 and over. 10.0 per cent of salary. 

The difference between the amounts contributed under the bill 
and the amounts required to furnish the proposed benefits would 
have to be contributed by the Government. 

The rates of contribution determined on show that New Zealand 
profited in that respect from the disastrous experience of New South 
Wales, where the flat-rate contribution of 4 per cent of salary had been 


Report on Public Service Superannuation Bill, 1906, p. 14. 
















238 CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 

found inadequate for the payment of benefits. All of the actuaries 
who examined into the state and sufficiency of the New South Wales 
fund had commented on the inadequacy of the contributions and one 
of them had pointed out, with great emphasis, the fact that the rate 
of contribution must depend necessarily on the age of entrance into 
the service, a fundamental principle carefully observed in New 
Zealand’s bill. 

Recommendation of Actuary of How Cost Should be Met. 

Mr. Fox showed that there are several ways in which the liability 
incurred in starting the proposed scheme might be met. The capital 
sum of £1,816,719 ($8,841,063) might be paid in immediately, but 
this course would not be practicable. A yearly payment of £72,669 
($353,643), which is the interest on the capital sum at 4 per cent, 
might be made, but this course would require much larger initial 
pa}unents than are necessary. What Mr. Fox proposed therefore 
was this: The liability for back services to be met by the Govern¬ 
ment year by year, as it accrues; liability for future services to be 
met by demanding from the members such proportion as might be 
thought proper of the full contributions necessary to provide the 
benefits, and by accumulating these to pay a corresponding propor¬ 
tion of the future liabilities as they fall due, and the Government of 
the day to pay, year by year, as they accrue, the remaining future 
liabilities not provided for by members’ contributions. In order to 
give effect to this arrangement he repeated that it would be necessary 
to have a periodical investigation of the fund to ascertain the amounts 
which will be required from time to time to meet the balance of 
current outgo without trenching on the fund contributed by the 
civil employees. Taking everything into consideration, Mr. Fox 
stated that, in his opinion, a yearly subsidy of £30,000 ($145,995) 
would be sufficient for the first three years, but that ultimately 
£50,000 or £60,000 ($243,325 or $291,990) would probably be 
required. It was his desire to ascertain in what way the fund could 
be most conveniently made actuarially sound with a minimum 
strain on the public purse by way of financial assistance. He con¬ 
sidered that that would be done most effectively by making the 
subsidy as small as possible at first, and subject to a comparatively 
small and practically regular increase so long as it should be neces¬ 
sary. At each successive triennial investigation the amount re¬ 
quired, during the following period, to meet the balance of current 
outgo could be determined with greater accuracy. Mr. Fox said: 

In advising as to the probable outgo of the first three years of the 
scheme I am in a very different position from that I shall occupy at 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 239 

the first triennial investigation in regard to the second three years, 
because there is at present no experience whatever of members 
respecting retirements and withdrawals. The bulk of the outgo 
will result from the payment of pensions to those entitled to retire 
immediately. If they all went on the fund at the outset the claims 
on their account would amount to approximately £27,800 ($135 289) 
“the first year, £26,600 ($129,449) in the second, and £25,300 
($123,122) in the third year—this outgo decreasing yearly. On the 
other hand, the pensions which will become due to those now aged 
57, 58, and 59 (or 47, 48, and 49 in the case of women), who may 
become pensioners during the triennium, though small at first, will 
be of an increasing nature, and the contributions of these members 
will not have had time to accumulate to an appreciable amount. 
Taking everything into consideration, I think that a yearly subsidv 
of £30,000 ($145,995) will be sufficient for the first three years. As 
I have said, however, I am quite unable to estimate the relief to the 
fund which will be experienced through members abstaining from 
retiring immediately they have the right to do so, nor am I able to 
estimate the strain upon the fund which will result from members 
under the pension-ages being retired on pension owing to ill health. 
This disadvantage will apply with less force at each successive 
triennial investigation in consequence of the accumulation of sta¬ 
tistics of the actual experience of members in these respects. But, 
as I have said, I think a yearly grant of £30,000 ($145,995) will 
supply all that will be required during the first three years. ( a ) 

Amendments to the Proposed Bill Recommended by Actuary. 

As the outcome of his investigation Mr. Fox recommended there¬ 
fore that the bill be adopted with the following amendments: 

(1) That the interest credited to “the contributed fund” shall not 
be at a lower rate than 4 per cent. 

(2) That the widows’ annuities shall be increased from £18 ($88) 
to £26 ($127). 

(3) That the annuities shall be payable to the widows and chil¬ 
dren of pensioners as well as to the widows and children of members 
who die while in the service. 

(4) That a yearly grant of £30,000 ($145,995) shall be made during 
the first three years. 

(5) That this yearly grant shall be increased (or decreased) from 
time to time in the manner explained heretofore, in order to meet 
the yearly accruing liability unprovided for by members’ contribu¬ 
tions. 

(6) That, in order to ascertain the necessary periodical grants a 
triennial actuarial investigation of the fund shall be made, the tri¬ 
ennial report to state what will be the probable sum required for the 
ensuing three years. 

(7) There will be no necessity to retain the present provision for 
the guarantee of any deficiency in the fund. ( 6 ) 


o Report on Public Service Superannuation Bill, 1906, p. 15. 
&Idem, p. 16. 



240 CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 

Advantages of a Superannuation System. 

In closing his report Mr. Fox submitted his reasons for recom¬ 
mending superannuation measures generally and this scheme in par¬ 
ticular. Said he: 

The advantages arising from well-considered superannuation 
schemes are so evident that many large employers or clerical and 
other labor have recognized their importance by adopting schemes 
of the kind in practice, and the tendency of the present day appears 
to be in the direction of extending the system. It has been pointed 
out by others that a sentimental consideration for the employee is 
not the sole motive for expenditure of this kind by corporations and 
bodies of men engaged in the profitable investment of capital. They 
are certainly guided by business principles and realize that well- 
considered expenditure in this direction is justified by the ultimate 
results. All employees are compelled to partially provide for their 
future, thus relieving their employer of the assistance he would be 
practically forced to extend in necessitous cases. But perhaps the 
chief advantages to the employer are that the employees as a body 
are more firmly attached to his service and he is enabled to exercise 
a freer hand in retiring aged employees at high salaries and promoting 
younger men at lower salaries. All interests are best served in the 
end by placing on the pension list old servants who are past their 
work and replacing them by younger ones who are in their prime. 

I respectfully submit that the following are sound reasons why the 
scheme I am advocating should be accepted in its entirety: 

(1) On the one hand, it will give full effect to the wishes of the civil 
service. 

(2) On the other hand, it will impose the minimum of liability upon 
the Government to begin with, which liability will not be erratically 
subject to sudden large increases in the future. The increase in the 
cost of superannuation itself will be very gradual, being for many years 
probably between £1,000 and £2,000 ($4,867 and $9,733) per annum, 
and when the present outlay for compensation, gratuities, and pen¬ 
sions is taken into account I believe the yearly increase in the total 
Government assistance to civil servants will be still further reduced. 
Such a gradual increase will cause no undue strain to fall on the future 
increasing resources of the country. 

(3) The fund will be always sound if otherwise properly conducted. 
When the unsatisfactory condition of some large government funds 
of this kind in other parts of the world is considered, it will be recog¬ 
nized that this is a matter of the first importance; and I say, without 
any reservation, that the fund may be subjected at any time to the 
most exacting actuarial investigation, and, if no departure has been 
made from the principles I have laid down, it will always pass the 
test satisfactorily, thereby adding one more to the many large con¬ 
cerns of which the Dominion of New Zealand has cause to be proud. (°) 

Superannuation Bill of 1907 Proposed. 

Following this actuarial investigation, the bill was redrafted 
as the “ Public Service Superannuation Bill, 1907.” On November 


Report on Public Service Superannuation Bill, 1906, p. 17, 



CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


241 


12, 1907, Mr. Fox submitted a brief report on this second bill, which 
he found very much stronger from an actuarial viewpoint than the 
one of the previous year. The chief improvements were ones recom¬ 
mended by Mr. Fox in his previous report, namely, a provision for a 
yearly subsidy of £20,000 ($97,330) (though he had asked for £30,000) 
($145,995); a provision for a triennal investigation and suitable form 
of actuarial report thereon; and a provision making widows’ and 
orphans’ annuities payable in the case of contributors dying after 
(as well as before) becoming superannuated, the balance of compensa¬ 
tion not received by way of'pension being included in the optional 
capital payment. Two other important changes were made in the 
bill. The scale of contributions between ages 30 and 50 was increased 
from 5, 5, 6, and 7 per cent to 6, 7, 8, and 9 per cent. The pensions 
were based on the average salary of the last three years instead of on 
the final salary. 

In one respect this second bill, as first drafted, was a disappoint¬ 
ment to the actuary, and he accordingly made a protest in his report, 
which proved effectual, for the undesirable clause in the bill was 
changed to correspond with his recommendation. He had strongly 
advocated, from the first, that the section guaranteeing any future 
deficiency in the fund be omitted altogether and a section inserted 
making provision for the annual appropriation of £30,000 ($145,995), 
and such further sums as the triennial investigation showed were 
necessary. He stated that he did not insist on the sum of £30,000 
($145,995) as absolutely necessary, that £20,000 ($97,330) would do 
as well if provision were made for triennial adjustment of the amount, 
should it prove to be insufficient. “I inserted £30,000 ($145,995),” 
he said, “ because, after strict inquiry, I considered that sum would 
be sufficient, while I am not sure that a smaller sum would.” 

In conclusion, he emphasized the fact that the scheme would 
have two opposite effects. While it would require an initial annual 
subsidy of £20,000 to £30,000 ($97,330 to $145,995), subject to an 
annual increase for some years, it would also have the effect of dimin¬ 
ishing expenditures in other directions. There had been paid out 
of the Consolidated Fund, the year before, over £8,000 ($38,932) as 
gratuities, an outlay that, under the terms of the bill, would cease 
immediately. There was also paid out over £8,000 ($38,932) as 
compensation, an expense that would cease to accrue when the act 
came into operation, and in twenty years or so would practically 
cease. Finally, there was also paid during the previous year over 
£26,000 ($126,529) as pensions, and in about twenty years this 
outgo would also cease. There was thus £42,157 ($205,157)® paid 
from the Consolidated Fund the year before as assistance to civil 
servants by way of gratuities, compensation, and pensions, and as 

a See page 227. 

16* 


35885—S. Doc. 290, 61-2 


242 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


this outgo would diminish, under the terms of the bill, until it prac¬ 
tically ceased altogether in about twenty years, while the expendi¬ 
ture under the bill was increasing at the same time, Mr. Fox thought it 
it evident that the practical consideration of importance was the total 
annual amount required from the consolidated fund for all these pur¬ 
poses taken together. He stated that he thought it highly probable 
that the annual decrease in the present outgo would practically balance 
the annual increase in the subsidy for the next twenty years. 

Actuary Made Only Estimate of Cost, Instead of Calculation. 

It is of interest in considering the probable cost to the New Zealand 
Government of establishing and maintaining the proposed superan¬ 
nuation fund to note that after the first year the amounts mentioned 
by the actuary are all estimates and not calculations. The sum of 
money required the first year to retire all those in the service who 
had reached the age of retirement was calculated to be £28,576 
($139,065). It would have been perfectly possible, having all the 
necessary data as to the age, length of service, and amount of salary 
of all the 5,593 members of the civil service, to have carried out the 
calculation to the end of the period when all present members of the 
service would be dead, and thus have shown with precision the total 
maximum cost of the annuities for back services to all present members 
of the service. It is to be regretted that the calculations were not car¬ 
ried out to the end, so that the possible maximum cost might be 
known with definiteness. The actual cost would, of course, be less 
than such a maximum cost, since no allowance could have been 
made for resignations in the absence of data on the subject. The 
calculation of a possible maximum cost would, however, be much 
more satisfactory than the most conservative estimate, acknowledged 
to be merely an estimate. At the hearings of the Public Accounts 
Committee on November 13, 1907, Mr. Fox was examined on the 
matter of cost as follows: 

What is the maximum amount which a scheme like this will in¬ 
volve the colony in?—I have explained on previous occasions when I 
have been here that I have an objection to saying that I can give 
correct estimates for a long distance ahead; but I can form some 
idea, and I will give you that idea. Whatever is the initial subsidy 
required, that will have to go on increasing for a large number of 
years. I have been looking lately at the composite effect of all the 
payments for pensions, gratuities, and compensation, totaling 
£42,000 ($204,393) at present; and the £30,000 ($145,995) added on 
to that for the first year would make £72,000 ($350,388) to come out 
of the government purse. It will never, I consider, be more than 
that. In the course of twenty years’ time the £42,000 ($204,393) 
will have vanished altogether, roughly speaking. At that time the 
total yearly outgo will be very much less than the first year’s £72,000 
($350,388)—very much less; but the £30,000 ($145,995) will have 
increased. It may have increased to £55,000 or £60,000 ($267,658 
or $291,990). That will take the place of everything included in the 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 243 

present £72,000 ($350,388). After the first year £7,000 or £8,000 
($34,066 or $38,932) paid in gratuities will vanish altogether from 
the total, and so the £72,000 ($350,388) will not all be wanted by 
that much. Taking the £42,000 ($204,393) that is being paid at 
the present time per year, I consider that possibly not more than 
£10,000 ($48,665) per annum over that sum will be wanted for the 
whole thing eventually. That is about £50,000 ($243,325). I am 
speaking of fifty years’ ahead or more. The amount will have 
increased to more than £50,000 ($243,325) previous to that, but 
will be likely to come down to, say, £50,000 ($243,325) as a perma¬ 
nency. That will take the place of everything—there will be no 
other outgo. 

For how long will the amount to be paid under the bill keep on 
increasing?—For a good many years. 

. Can you give us any idea how long? What I want to get at is 
what the colony is being committed to?—I will still take the whole 
lot together—the £42,000 ($204,393) that is being paid now and the 
£30,000 ($145,995) proposed to be paid out, making £72,000 ($350,388) 
altogether. I estimate that in about thirty-five years’ time the total 
amount will be about the same as that. It will be all on account 
of the pension fund then—there will be no other outlay. It will 
certainly have come down in eighty years’ time to its final level— 
say £50,000 ($243,325).(°) 

It can not be stated whether this uncertainty as to the ultimate 
cost of the enterprise in which the Government was embarked by 
the passage of the superannuation act left any feeling of uneasiness 
in the minds of those who voted for it. At a meeting held to com¬ 
memorate the passing of the act, Sir Joseph Ward, the Premier, is 
reported by the New Zealand Times of December 19, 1907, to have 
reminded the people of ‘‘this potent fact, that in addition to the 
£20,000 ($97,330) a year which the country was now contributing, 
at any time, if that amount was found to be insufficient, the country 
was bound by act of Parliament to provide the increase, whatever 
that might be. They knew from the actuary that the amount in 
time must be increased to £50,000 or £60,000 ($243,325 or $291,990) 
a year. He believed that without a contented service the country 
did not get the full value in return. It was proper that the country 
should pay its servants well so as to secure attachment to the serv¬ 
ice, and thus retain its employees. He believed they would get 
that attachment as a result of this act.” Another speaker at this 
same meeting, Mr. G. Allport, chairman of the superannuation com¬ 
mittee, denied that the civil servants were paying for much of what 
they got, and said that “ they were not going to pay a sufficient amount, 
by a long way, to provide the pensions they would receive, and they 
ought to be grateful to the Government and the country for having 
agreed to contribute in the manner which was done, enabling a sub¬ 
stantial pension to be paid to each member of the service upon his 
retirement.” 


a Report on Public Service Superannuation Bill. 1906. Minutes of evidence, p. 4. 



244 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


The bill was passed November 25 and became a law with the fol¬ 
lowing provision in reference to a subsidy: 

“In the month of January in every year the minister, of finance 
shall pay into the fund and out of the Consolidated Fund, without 
further appropriation than this act, the sum of twenty thousand 
pounds ($97,330), together with such further amount (if any) as is 
deemed by the governor in council, in accordance with the aforesaid 
report of the actuary to be required to meet the charges on the fund 
during the ensuing year.” 

Main Features of the Law Enacted. 

The main features of the law are then as follows: All permanent 
civil servants and all temporary clerks who had served the Gov¬ 
ernment for more than five years continuously are included in the 
public service superannuation scheme, if not provided for by the 
police, railway, or teachers’ funds. They were given the oppor¬ 
tunity for six months of joining the fund. Anyone who did not elect 
to become a contributor within the prescribed six months is not 
allowed to do so at a future time, except on payment of a sum equal 
to the total contributions he would have paid had he elected to be¬ 
come a contributor in the beginning, plus five per cent compound 
interest. Anyone who joins the fund has the option of continuing 
the life insurance policy he had been required to take out under pre¬ 
vious legislation, or of surrendering it. In case he elects not to join 
the superannuation fund, he is required to continue the policy. All 
new entrants to the public service are compelled to join the fund. 
The amount of their contributions is determined by their age on 
entering the service, ranging from 5 to 10 per cent of their salaries. 
Pensions are claimable by men at the age of 65 (60 was the age origi¬ 
nally chosen, but the change to 65 was made in committee at the last 
moment) or after forty years of service, and by women at the age of 
55 or after thirty years of service. There is no compulsory age of 
retirement. The amount of each pension is as many sixtieths of the 
average salary during the last three years before retirement as the 
pensioner has been years in the service, but it will, in no case, exceed 
two-thirds of this terminal salary. The contributor may elect on 
retirement to take the amount of his contributions, without interest, 
instead of this retiring allowance. In case of medical unfitness, 
retirement is allowed on the usual pension of ^th for each year of 
service. The medical certificate of two approved practitioners is re¬ 
quired to satisfy the board that the employee has become permanently 
unable to perform his duties by reason of mental or bodily infirmity 
not caused by irregular or intemperate habits. An ordinary medical 
examination is required on entrance into the service. In case of the 
death of a male contributor, whether before or after becoming entitled 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 245 

to a retiring allowance, an annuity of £18 (S88) a year is granted to 
his widow, or she may choose instead the return of the deceased’s 
contributions. Five shillings ($1.22) a week is granted to each child 
under 14 years of age, whether the deceased contributor is a male or 
a female parent. Where there is neither widow nor child the differ¬ 
ence between the contributions paid by the deceased and the pension 
received by him or her is paid to his or her legal representatives. In 
case of voluntary withdrawal or in case of dismissal for any cause, 
the contributor is entitled to a refund of the whole amount actually 
contributed by him to the fund, but without interest. The fund 
established under this act consists of the contributions of the em¬ 
ployees, the subsidy from the Government, and the interest accruing 
from the investment of the fund. All moneys belonging to the fund 
are paid to the public trustee, who invests them in freehold securities 
at current rates of interest. The average rate of interest yielded by 
such investments is reported (by a member of the board) to be about 
5 per cent. The fund is administered by a board called the Public 
Service Superannuation Board consisting of ten members, of whom 
five are appointed by the governor and five elected by the contribu¬ 
tors. # This board has the services of one secretary and two clerks. 
The cost of administration is reported to be nil except for the sum of 
£400 ($1,947) per annum paid to the secretary of the board as salary. 

“The Public Service Superannuation Act, 1907,” accordingly 
came into operation January 1 , 1908. Immediately applications to 
become contributors to the fund commenced to come in, and to an 
extent that showed at once that the act was a popular measure and 
would prove most successful in its operation. Up to the end of 
June, 1908, that is, six months after the act became effective, no 
fewer than 7,028 members of the public service voluntarily became 
contributors. This included the majority of the 5,593 persons 
enumerated in the census of the departments made by the actuary and 
also officials who, prior to the passing of the Classification Act of 1907, 
were only temporarily employed but who became permanent officers 
by the passage of that act. 

The act provides that, until an official becomes a contributor to 
the fund, he is subject to the provisions of the previous civil service 
acts relating to insurance and deductions from salary. On becoming 
a contributor, the official is entitled at his option— 

(1) To keep his insurance policy alive independently of the 
superannuation act; 

(2) To surrender the policy and have its surrender value paid to 
the public trustee to be invested independently of the fund, and to 
be paid to him, together with all interests on it, when he retires or 
to his personal representatives on his death; or, 

(3) To surrender the policy and receive the equivalent of its 
surrender value in the form of a paid-up policy. 


246 CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 

Since the provision for widows and dependents under the new super¬ 
annuation scheme is not on such a high scale as to make insurance no 
longer necessary, it is the expectation of the government insurance 
commissioner that large numbers of civil servants whose own old age 
is well provided for by the superannuation fund will see the wisdom 
of making provision for their families by assurance on their lives, for 
which the department offers special facilities. Even though compul¬ 
sory insurance was imposed, under the Act of 1893, only on new 
entrants under forty years of age, a large proportion of the support 
given to the Insurance Department came from voluntary action on 
the part of government employees in all branches and grades of the 
service, including teachers, policemen, railway men, and civil serv¬ 
ants. The following statement, taken from a “ Brief Survey of New 
Zealand’s State Life Insurance,” prepared for distribution at the 
Franco-British Exposition in London, 1908, shows that government 
employees contributed in premiums upwards of £44,000 ($214,126) a 
year out of a total premium income of over £320,000 ($1,557,280). 
Of this less than 13 per cent was of the nature of compulsory insur¬ 
ance, as shown by the following statement: 

Yearly premiums. • 


Railways. $74,457 

Posts and Telegraphs. 37, 959 

Education. 27, 252 

Police Force. 9, 733 

Other Departments (per Treasury). 40, 392 


Voluntary assurance premiums. 189, 793 

Compulsory assurance premiums (under Civil Service Insurance Act). 28, 226 


218, 019 

Operation of Law, First Six Months. 

The Public Service Superannuation Board’s report for the first six 
months of the law’s operation shows, however, that considerable diffi¬ 
culty was experienced at first, owing to the fact that the temporary 
officers who had become permanent were under the impression that 
they were exempt from the necessity enjoined on all officers joining 
the service since 1893 of having to insure their lives, and they con¬ 
sidered that the option given by the act to all those newly made per¬ 
manent of having the privilege of electing within six months to 
become contributors, exempted them in the meantime from having to 
insure under the provisions of “The Civil Service Insurance Act, 
1893,” should they decide not to become contributors until the six 
months’ option had expired. This was, however, overcome, and 
with a few exceptions they undertook the responsibilities of other 
public officers and joined the fund. 

This report states that “the popularity of the act has been dis¬ 
tinctly proved by the very large number of officials who have volun¬ 
tarily joined as contributors. There are cases where some who have 











CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 247 

become permanent officers under the Classification Act, and who had 
to join as contributors or insure, demurred at having to accept the 
responsibilities of the position, and considered it somewhat of a hard¬ 
ship that, being already insured in the Government Insurance Office 
or other private companies, they should have their small salaries 
further taxed by having to contribute to the fund or take out a policy 
under “ The Civil Service Insurance Act, 1893;” but, as against the 
few who felt this hardship, a large majority of the public service felt 
that a very great privilege had been accorded them under the liberal 
provisions of the act. Many of these had given years of their life to 
the service of the Dominion as temporary officials, and had no hope 
or prospect of any retiring allowance when their time came to leave 
the service, and they were gratified to find that under this act their 
past service would be taken into account when they retired, and that 
they would be accorded the same privileges as regards a retiring allow¬ 
ance as those permanent officers with whom they had worked for 
many years.” 

The following statement for the six months ending June 30, 1908, 
was made:( a ) 


Number of contributors. 7,028 

Annual contributions. $267, 658 

Contribution from the Consolidated Fund. $97, 330 

Retiring allowances granted. 63 

Representing an annual payment of.$26, 547. 43 

Number of officials retired as medically unfit. 9 

Representing an annual payment of. $3, 931. 69 

Number of contributors who have died during the six months. 9 

Annual pension to five widows and seven children. $881 


The total allowances granted, it will be seen, amount to £6,444 lid. 
($31,359.95). The largest pension paid is £339 3s. 4d. ($1,650.55) and 
the smallest £12 9s. 9d. ($60.77). 

Public Attitude in Regard to Law. 

The superannuation scheme seems to be satisfactory to the New 
Zealand public as well as to the civil employees. Press comments 
at the time of its adoption took the form of congratulation rather 
than of any criticism of the extra charge laid on the country. Sym¬ 
pathetic interest was also shown by Australian and English papers. 
“ While the superannuation scheme undoubtedly imposes a heavy 
tax on the Consolidated Revenue, it at the same time relieves it from 
another heavy outlay, and the additional cost of superannuation is 
not so great as might at first be supposed,” was the comment of a 
Melbourne paper. ( * 6 ) This cost was denominated by another journal 
as a “very moderate pull on the Dominion’s exchequer.”( c ) “Th e 
annual cost of the scheme, although not yet ascertained, will, to so me 


a Report of Public Service Superannuation Board, June 30, 1908. 

6 Australasian Insurance and Banking Record, Melbourne, February 20, 1908. 
c New Zealand Times, November 21, 1907. 












248 CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 

extent, be offset by a direct saving in other directions, while the 
indirect saving through securing a more efficient public service 
should be very material/’ was the view expressed by a Sydney 
paper.( a ) The comment of a London insurance paper was “We 
believe there is here outlined an admirable scheme of superannu¬ 
ation, the administration of which will be watched with interest in 
many quarters of the world. We content ourselves in the mean¬ 
time with observing that the indications are that it will work out to 
the benefit of deserving State servants, whose habits of thrift and 
self-help it will stimulate, without imposing an undue burden upon 
the people of the Dominion.” ( b ) 

The principle involved in the sharp line of demarcation drawn by 
the actuary between the payment of allowances on services rendered 
prior to the adoption of the plan and the payment of allowances on 
services rendered after the adoption of the plan was clearly under¬ 
stood and discussed in some of the editorial comments. Speaking of 
the difficulties which presented themselves in the way of an appli¬ 
cation of the pension idea which would be at once financially sound 
and fair in its operation, the London Insurance Record said: 

As the premier pointed out in the course of a debate on the bill, 
the civil service in New Zealand is old compared with the age of the 
country, and it was because of that fact that there was a supreme 
difficulty on the part of the Government in putting on the statute 
book a superannuation act forty years after some of the men had 
joined the service, the incidence of which was light in its burden 
upon members of the service. If the scheme had been commenced 
forty years ago a universal contribution rate of 3 or 4 per cent of 
salary for every one in the service would have sufficed. But the 
country has grown up, the old men in the service are leaving, and 
those who remain must fill the void. 

More clearly still the Sydney “Review” states the problem and its 
solution in the separation of accrued from future liabilities: 

The pensions are liberal, and a scheme of this description, applying 
to present officers, many of whom can retire immediately on very 
fair pensions, must of necessity entail a heavy liability on the part 
of any government. The favorite method, however (vide New 
South Wales and Cape Colony civil service schemes), has been to 
ignore this liability and to go on paying the pensions of the old men 
who retire, out of the contributions of the young men who join the 
scheme, until the funds are exhausted, and the outlay for pensions 
exceeds the income from contributions. The actuary, Mr. Morris 
Fox, has made the recklessness of this method quite apparent in his 
comprehensive reports, and the Government has agreed to start the 
scheme with an annual payment of £20,000 ($97,330), the subsidy 
to be increased by such further amounts as will be sufficient to pay 
the difference between the pensions falling due and the amount of 


° Sydney Review, February 29,1908. 
b London Insurance Record, February 21, 1908. 



CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


249 


pension the contributions would have actually purchased. (For 
example, if an old servant retires on £400 ($1,947) a year while his 
contributions would only have purchased £10 ($49), the fund pays 
the £10 ($49), and the Government finds the balance, £390 ($1,898) 
per annum. The contributions of the younger members will therefor 
be accumulated at compound interest to help provide their pensions 
when they become payable, and will not be absorbed by meeting 
more immediate liabilities; the cost of providing current pensions 
being borne by the present taxpayers, and not by posterity. If the 
scheme were commenced without contributions, the pensions falling 
due would be the measure of the Government’s annual liability, 
and by meeting this liability (or rather the portion not paid for by 
the contributor) at once, Sir Joseph Ward has made a fair division of 
the annual outlay between present and future taxpayers. It is this 
simple, but ingenious financial arrangement which differentiates the 
scheme from all others with which we are familiar, and the result is 
three-fold; the solvency of the fund is secured, the present strain 
on the exchequer is the minimum compatible with soundness, and 
only a fair share of the liability is transferred to posterity. 

TEACHERS’, POLICE, AND GOVERNMENT RAILWAYS 
SUPERANNUATION ACTS CONSOLIDATED. 

It is generally felt that it would be desirable to harmonize the 
details of all the plans so that the provisions for civil servants, 
teachers, policemen, and railway men might all be included in one 
comprehensive law. A long step toward that end was taken last 
year when the four acts of consolidation were passed: 

(1) “The Public Service Classification and Superannuation Act, 
1908,” which is a consolidation of the “Public Service Classification 
Act, 1907,” and the “ Public Service Superannuation Act, 1907,” 
with the exception of certain omitted sections. 

(2) “The Public Service Classification and Superannuation Amend¬ 
ment, 1908,” which is to be read with and deemed part of the above 
act, being merely an amendment to include the teachers under the 
general terms of classification and superannuation provided for 
members of the “public service.” 

(3) “The Police Force Act, 1908,” which is a consolidation of 
“The Police Force Act, 1886,” “The Police Provident Fund Act, 
1899,” and those sections of the “Public Service Superannuation 
Act, 1907,” which relate to the rate of contribution paid by con¬ 
tributors to the Fund. 

(4) “The Government Railways Act, 1908,” which is a consolida¬ 
tion of various improvement acts including “The Government 
Railways Superannuation Fund Act, 1902,” “The Government Rail¬ 
ways Superannuation Fund Contributions Act, 1903,” and the 
sections in the “Public Service Superannuation Act, 1907,” relating 
to the rate of contributions to be paid to the Fund by contributors 
entering the service at various ages. 


250 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


The result of these various consolidation acts is that contribu¬ 
tion to the superannuation fund is compulsory now for new entrants 
in every branch of the government service, and contributions are 
fixed at uniform rates for all branches. The rates of contribution 
are those adopted for the public service and the teachers, which 
were notably higher than those formerly imposed on the railways 
members, being 5, 6, 7, 8, 9, and 10 per cent for various ages as 
against 3, 4, 5, 6, 7, and 10 per cent for the same ages. 

The four laws now read uniformly as regards the rates of contri¬ 
bution to be paid by a contributor, as follows: 

(a) Five per cent if his age does not exceed 30 years at the time 
when the first contribution becomes payable; 

( b ) Six per cent if his age then exceeds 30 years but does not 
exceed 35 years; 

( c ) Seven per cent if his age then exceeds 35 years but does not 
exceed 40 years; 

(d) Eight per cent if his age then exceeds 40 years but does not 
exceed 45 years; 

( e ) Nine per cent if his age then exceeds 45 years but does not 
exceed 50 years; and 

(/) Ten per cent if his age then exceeds 50 years. 

The consolidation of the various acts resulted also in the harmo¬ 
nization of some slight variations in the benefits offered. The most 
striking discrepancy was in the case of the teachers’ plan, in which 
back service counted for only one-half in determining the amount 
of the pension, a provision that seems to have caused considerable 
discontent. “The Public Service Classification and Superannuation 
Amendment, 1908,” corrected this discrimination, giving teachers 
full credit for back service and giving them pensions on the same 
basis as the public servants. A comparison of the benefits under 
the various New Zealand government superannuation schemes now 
in force is as follows: 


COMPARISON OF BENEFITS UNDER THE VARIOUS GOVERNMENT SUPERANNUATION 
SCHEMES IN FORCE IN NEW ZEALAND. 


Benefit. 

Public Service Fund and 
Teachers’ Fund. 

I. Pensions on ordinary 
retirement, at or over 
pension age: 

(1) Retiring age. 

Age 65 or after 40 years’ 
service, or age 60 with 
approval of minister. 

(2) Amount of pen¬ 
sion. 

snth of average salary 
for last 3 years, for 
- each year of service. 

(3) Pension limit. 

£8 or § of average salary 
(as above). 


Railway Fund. 

Police Fund. 

Age 60 or after 40 years’ 

Age 60 and not less than 

service, or 35 years’ 
service with permis¬ 
sion of board. 

25 years’ service. 

^th of final salary (or 
average of last 7 years, 
if increased in last 5 
years) for each year of 
service. 

Same as in railway fund. 

gg or § of final salary (as 
above). 

!§ or § of final salary. 












CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 251 

COMPARISON OF BENEFITS UNDER THE VARIOUS GOVERNMENT SUPERANNUATION 
SCHEMES IN FORCE IN NEW ZEALAND—Continued. 


Benefit. 


Public Service Fund and 
Teachers’ Fund. 


Railway Fund. 


Police Fund. 


II. Benefits on retire¬ 
ment before pension 
aget 

Medically unfit. 


V. Benefits on voluntary 

withdrawal or dis¬ 
missal (not for mis¬ 
conduct) before pen¬ 
sion age. 

VI. Benefits on dismissal 

for misconduct. 


g'oth of average salary 
for last 3 years, for 
each year of service. 
(In teachers’ fund only 
after 15 years’ service.) 


Return of contributions 
without interest. 


Same as above. 


^&th of final salary (or 
average of last 7 years, 
if increased in last 5 
years) for each year of 
service. 


Difference between con¬ 
tributions paid and 
pension received, to¬ 
gether with compen¬ 
sation (1887, Act). 


Same as above. 

An annuity of £18 ($88) 
during widowh o o d , 
and 5s. ($1.22) per 
week for each child 
until 14 years of age or 
option of return of 
such portion of contri¬ 
butions as the Board 
thinks proper. 


Return of contributions 
without interest, to¬ 
gether with compen¬ 
sation (1887, Act). 

Return of contributions 
without interest. 


Under 5 years: Return of 
contributions. 

5 to 15 years: 1 month’s 
pay for each year’s 
service up to 12. 

Over 15 years: The usual 
pension. 

If injured on duty, Board 
may grant pension up 
to limit. 

Difference between con¬ 
tributions paid and 
pension received (at 
discretion of Board). 


No benefit. 

If from injuries on duty: 
An annuity of £18 ($88) 
during wdowbood, 
and 5s. ($1.22) per week 
for each child until 14 
years of age. 

If not from injuries on 
duty: Such sum as the 
Board thinks proper 
up to amount of contri¬ 
butions. 

Under 10 years: Nothing. 

After 10 years, and not 
over 25: Return of 
three-fourths of contri¬ 
butions. 

Return of not more than 
one-half of contribu¬ 
tions. 


II. Benefits on death of 
pensioner. 


IV. Benefit on death of 
contributor while 
in service: 

(1) If no widow or 

children. 

(2) If widow or chil¬ 

dren. 


(a) If no widow or chil¬ 
dren: Difference be¬ 
tween contributions 
paid and pensions re¬ 
ceived. 

(b) If a widow: An an¬ 
nuity of £18 ($88) dur¬ 
ing widowhood, or 
option of difference 
between contributions 
paid and pensions re¬ 
ceived. 

(c) If children: A weekly 
payment of 5s. ($1.22) 
for each child until 14 
years of age. 


Same as above 
_do. 


Compared with 4,963 men and 630 women in the public service in 
1907, there were that same year 815 men and 6 women in the police 
scheme, and 8,265 men in the railway scheme, and in 1908 there were 
1,436 men and 1,446 women in the teachers’ plan. 

Report on the Teachers’ Fund. 

The second report of the board constituted by “The Teachers’ 
Superannuation Act, 1905,” shows that the number of contributors 
to the Teachers’ Superannuation Fund on March 31, 1908, was 2,882. 
The aggregate annual salaries of the contributors to the fund was 
£446,607 ($2,173,413) and the actual amount of contributions received 
during the year was £32,676 ($159,018). Thirty-eight new retiring 
allowances were granted during the year to contributors, 6 allowances 























252 CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 

to widows and orphans, which added to 94 already existing made a 
total of 138 allowances granted, but as 8 of them were discontinued 
during the year only 130 existed at the end of the year. These 
amounted to £6,062 10s. lid. ($29,503). 

Of the number of contributors who retired during the year 24 (in¬ 
cluding 4 “medically unfit’ 7 cases) were granted annual allowances 
aggregating £1,389 10s. ($6,762). Six widows and eight children, 
the representatives of six contributors who died, were granted annual 
allowances amounting to £212 ($1,032) and a refund of contributions 
of £132 9s. 9d. ($644.75). The total number of retired contributors 
on account of whom annual allowances were granted during the year 
was therefore 30. Four contributors whose length of service was 
not over fifteen years retired as being “ medically unfit for further 
duty. 77 In each of these cases, a sum equal to one-twelfth part of 
the total salary received by them during all the years of their service 
prior to January 1, 1906, was granted, together with a refund of 
their contributions to the fund. The total amounts were £212 10s. 
Id. ($1,034.15) and £21 9s. 9d. ($104.57), respectively: total £233 
19s. lOd. ($1,138.72). Seven contributors died before entering upon 
pension, and their contributions to the fund, amounting to £87 4s. 3d. 
($424.42) were paid to their legal representatives. To one hundred 
contributors who voluntarily retired from the education service 
before becoming entitled to participate in the benefits of the fund 
contributions amounting to £1,014 10s. Id. ($4,937.08) were re¬ 
turned. The total number of contributors who retired from the 
education service during the year was 141. Five pensioners died 
during the year, of whom 4 left widows, and 2 children under the age 
of fourteen years, to whom annual allowances were granted. Three 
children attained the age of fourteen years, and their allowances 
consequently ceased. 

The balance to the credit of the fund at the close of March, 1908, 
was £62,222 11s. ($302,806), and of this sum £48,100 ($234,079) was 
invested on mortgage—£37,100 ($180,547) at 4J per cent, and 
£11,000 ($53,532) at 5 per cent. The balance of £14,122 11s. 
($68,727), bearing interest at 4 per cent was awaiting investment by 
the public trustee. 


Report on the Police Fund. 

The last annual report of the Board of Administration of the 
Police Provident Fund shows that 1 sergeant and 7 constables were 
retired with annual allowances during the year which ended on 
March 31, 1908. There were at that date 3 exinspectors, 22 exser¬ 
geants, 40 exconstables, 3 exdetectives, 2 widows, and 2 children 
on the fund, their aggregate annual allowance being £6,574 2s. 6d. 
($31,992.98). The balance sheet shows that the contributions dur- 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


253 


ing the year amounted to £7,232 3s. 4d. ($35,195.34), fines to £46 12s. 
6d. ($226.90), and interest to £1,509 16s. 9d. ($7,347.62), whereas, 
on the other hand, life allowances amounted to £6,327 19s. 3d. 
($30,795.03), and numerous other grants were paid, leaving to the 
credit of the fund of £30,537 5s. 7d. ($148,609.67), an increase over 
the amount on hand at the corresponding date of the preceding year 
of £1,411 4s. 4d. ($6,867.69). 

Report on the Government Railways Fund. 

The report of the Board on the Government Railways Super¬ 
annuation Fund for the year ending March 31, 1908, shows that 
members contributed £45,669 0s. 9d. ($223,248.37) to the fund dur¬ 
ing the year; fines amounted to £239 5s. ($1,164.31), and interest to 
£5,352 3s. ($26,046.24), while on the other hand, superannuation 
allowances to the amount of £26,758 16s. 7d. ($13,279.85) were paid 
during the year to 484 members of the railway service who had either 
voluntarily resigned or been retired as medically unfit, allowances 
amounting to £3,799 12s. 9d. ($18,490.94) were paid to 105 widows 
and 173 children, the dependents of deceased members of the service 
who had not retired on superannuation at the time of their death, 
refunds amounting to £342 9s. Id. ($1,666.55) were paid to the legal 
representatives of deceased members, a sum of £3,610 19s. 7d. 
($17,572.83), representing contributions of members of the service 
who voluntarily retired or whose services were otherwise dispensed 
with during the year was refunded to members concerned and other 
small disbursements were made, leaving a balance to the credit of 
the fund of £126,642 18s. lid. ($616,307.90). 

The total amount of annual allowances granted by the Board from 
the beginning of the fund until the end of March, 1908, was distributed 


as follows :( a ) 

Life allowances on account of voluntary retirements (449 persons). $140, 766. 74 

Life allowances on account of retirements as “medically unfit,” (87 

persons). 24,193.13 

Allowances to 109 widows and 211 children. 22, 935. 39 

Total annual allowances granted. 187, 895. 26 


Seventy beneficiaries have died since the inauguration of the fund, 
including nineteen during the year under review^, and seven members 
who had been placed on the fund as “medically unfit” resumed duty. 
The fund was relieved of an annual liability of £4,621 18s. ($22,492.48) 
in respect to these seventy-seven members. Forty-four children 
have reached the age of fourteen years (eight during the past year), 
tw T o children have died, six widows remarried, and three widows died, 
lessening the liability of the fund by an additional £761 13s. ($3,706.57) 
per annum. 

“Report of Board on Government Railways Superannuation Fund, 1908, p. 2. 











254 CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 

The number of persons actually on the fund at March 31st, 1908, 
was 724, involving an annual liability of £33,226 7s. 9d. ($161,696.21) 
as shown by the following statement of annual balances and annual 
allowances actually granted by the board :( a ) 



Balance. 

Allowances. 

1903 . 

$34,340.88 
196,401.54 
334,184. 42 
442,776. 52 
538,899. 72 
616,307.90 


1904 . 

1905 . 

$58,450.23 
41,459.58 
30,895.85 
21,406.50 
35,183.10 

1900. . 

1907. . 

1908. . 

Less members died, etc. 


187,895.26 
26,199.05 

Annual liability at March 31,1908. 


161,696.21 




CONCLUSIONS. 

The experience of New Zealand in retiring its civil employees is 
particularly instructive to the student of superannuation schemes. 
Hampered by few theories or precedents, but mindful of the experi¬ 
ence of the mother country and of other British colonies, the citizens 
of New Zealand have proceeded to try several schemes, discarding a 
scheme as soon as its inadequacy or unsuitability was demonstrated 
and substituting another which was free from the features found 
objectionable in previous ones. The result has been a gradual devel¬ 
opment of ideas along rational lines, until it would seem that there 
has been evolved a plan that is actuarially sound, one that meets 
the requirements of the service, and one that fits in with the ideas 
of the people generally as to what is fair and suitable. 

After thirteen years of experience in granting straight pensions 
that plan was abandoned because of the fear that it meant eventually 
a too heavy charge on the public treasury. Abandoning the pension 
system, therefore, New Zealand contented itself for a period of 
thirteen years with making gifts of lump sums to each employee 
retiring from the service, basing the amount of the gift on the length 
of service. This was, however, merely a makeshift in recognition of 
the fact that old people could not be dismissed from office without 
great hardship unless some kind of provision was made for them. 
Even this was felt to be too heavy a burden on the Treasury, however, 
and there followed the Act of 1886, which authorized deductions from 
salaries, and was simply a scheme of compulsory savings established 
with the idea that the superannuated employee must be taken care of, 
but at his own and not at the public expense. It should be noted 
that the change made in 1886 was practically the withdrawal of a 
privilege which existed before, the compensation of a month’s salary 
for every year’s service, and was in harmony with the spirit of 


Report of Board on Government Railways Superannuation Fund, 1908, p. 1. 



















CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 255 

retrenchment which flourished in New Zealand in the last half of the 
eighties, when there was a considerable cutting down of salaries and 
dispensing with employees. While this arrangement promised relief 
to the Treasury, it was not satisfactory to the employees of the Govern¬ 
ment as a retirement measure, because they saw that the sum to the 
credit of the individual on retirement would be inadequate in case 
the officer lived many years after retirement. The actions taken in 
1871 of abolishing the pension system, and in 1886 of abolishing the 
compensation plan and requiring deductions from salaries were taken 
purely in the interest of the treasury. In 1893, for the first time since 
the pension system was established in 1858, action was taken which 
was designed purely and simply in the interest of the service. Good 
as far as it went, the provision for compulsory insurance proved, 
however, like the provision for compulsory savings, inadequate as a 
substitute for a retirement measure. Finally, in 1907, a contributory 
retirement plan with a subsidy from the Government was adopted. 
This plan, by permitting continuance of insurance in the Government 
Life Insurance Department if the employee so desires, affords ade¬ 
quate provision for every possible contingency in the life of the civil 
employee. 

The situation in New Zealand, therefore, at present is this: The 
Government has come to realize, on the one side, and the civil 
service, on the other, that it is impossible to get something for nothing. 
The Government has ceased to attempt the abolition of pensions and 
compensations and the compulsion of deductions from salary without 
making a corresponding contribution, and has become willing not 
merely to retire those who are already superannuated, but to con¬ 
tribute a certain permanent annual subsidy toward the support of a 
superannuation measure for the benefit of the civil service. At the 
same time, the members of the civil service have come to see that a 
system of free gifts from the Government, whether it be in the nature of 
pensions, compensations, or gratuities, is not the most desirable plan 
that could be devised, and they are almost unanimously willing to 
contribute from their salaries to the support of a retirement plan 
which meets their approval. 

The plan is based on two fundamental principles not observed in 
the contributory plans whose funds have become insolvent: 

(1) The rates of contribution are fixed by the age of entrance into 
the service and not by any arbitrary percentage of assessment. This 
means that the amount of the annuity is determined in each case by 
the length of service and amount of salary, and that each employee 
contributes only to his own retirement, so that the plan is equitable 
as between different classes of employees. 

(2) A sharp line of demarcation is drawn in this plan between 
accrued and future liabilities. The Government agrees to pay all 
annuities on services rendered up to the time of the adoption of the 


256 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


plan. Since the contributions of the civil servants are not sufficient 
to provide all the generous benefits—including those to invalids and 
widows and orphans—the Government agrees to make up whatever 
deficit there is on this score also. There is no expectation of making 
the plan self-supporting. 

The calculations as to the cost to the Government of establishing 
and carrying on this plan were carried only through the first year, 
but since the law makes provision for triennial valuations of the fund, 
this is of little practical importance if the people of New Zealand 
are willing to accept the plan on a mere estimate as to its cost. Even 
if the possible maximum cost had been computed out to the last 
year of life of the last member of the present service, the necessity 
for frequent valuations of the fund would be imperative on other 
grounds. The benefits provided under the plan are very liberal, 
including as they do allowances for the disabled and for the widows 
and orphans as well as for the superannuated. The sufficiency of the 
fund to meet these benefits can be ascertained only by periodical 
valuations, in view of the uncertainty, owing to the lack of statistics, 
as to the strain on the fund from invalidity allowances on the one 
hand, and the relief on the other from the forfeiture of interest by 
those resigning from the service before reaching the retirement age. 
It is apparent, however, that the fundamental principles underlying 
this plan might have been applied to a plan designed to be entirely 
self-supporting, but the people of New Zealand have been willing to 
increase the benefits under the plan beyond what the contributions of 
the employees could support and to make the contributions necessary 
for that purpose. With the liberal benefits provided under the 
Superannuation Act of 1907, requiring permanent help from the 
Government, it is plain that the actuary was right in insisting that a 
provision for frequent valuations of the fund is necessary to insure its 
actuarial soundness. 

Certain details of the plan are worthy of note by the student. 
There is no compulsory age of retirement, notwithstanding England’s 
experience that the absence of such provision is inadvisable. Pro¬ 
vision is made for the cash refund of contributions on separation from 
the service, but interest on them is forfeited—an offset to the liber¬ 
ality of the benefits provided for those who remain in the service. 
The retiring allowance is based on the salary during the last three 
years of service rather than on the average salary. These are features 
the wisdom of which can be determined only by experience. 

New Zealand’s experience in retiring its civil employees is especially 
instructive for two reasons, first, because of the variety of experiments 
made, and, second, because the final conclusion rests on theoretical 
principles generally acknowledged to be sound and yet in actual 
practice “more honored in the breach than in the observance.” 


Appendix. 


PUBLIC SERVICE SUPERANNUATION ACT. 


[1907, No. 63.] 

AN''ACT to provide a Superannuation Fund for the Public Service (November 25, 1907). 


Be it enacted by the General Assembly of New Zealand in Parliament assembled , and 
by the authority of the same, as follows: 

1. This Act may be cited as the Public Service Superannuation Act, 1907, and- 
shall come into operation on the first day of January, nineteen hundred and eight. 

2. In this Act, if not inconsistent with the context, “Board” means the Public 
Service Superannuation Board established under this Act. “Public Service” 
includes the High Commissioner’s Office, the Legislative Branch, and every Depart¬ 
ment of the Government service except the Government Railways Department, so 
much of the Police Department as is included in the Police Provident Fund Act, 
1899, and so much of the Education Department as is included in the Teachers’ 
Superannuation Act, 1905. “Contributor” means a contributor to the fund. “De¬ 
partment” means every branch of the Public Service which is administered sepa¬ 
rately. “Fund” means the Public Service Superannuation Fund. “Regulations” 
means regulations made by the Governor by Order in Council gazetted. “Salary ” of 
a contributor means the rate of salary or wages paid in respect of his sendee, but does 
not include allowances or payment for overtime. 

PUBLIC SERVICE SUPERANNUATION FUND. 

3. There is hereby established in connection with the Public Service a fund to be 
called the Public Service Superannuation Fund, which shall be administered by the 
Board. 

4. The fund shall consist of (a) the contributions from contributors as hereinafter 
provided; (b) moneys at any time paid into the fund under sections thirty-two and 
thirty-three hereof; and (c) interest from time to time accruing from investment of 
the fund as hereinafter provided. 

5. All moneys belonging to the fund shall be paid to the Public Trustee, who shall 
from time to time invest the same in such manner as is prescribed by regulations. 

6. The fund shall be administered by a Board called the Public Service Super¬ 
annuation Board, consisting of ten members, namely: A Minister of the Crown; four 
persons to be appointed and removable by the Governor in Council; two persons to 
be elected by and from the contributors who belong to the Post and Telegraph Depart¬ 
ment; and three persons to be elected by and from the contributors who belong to 
other Departments of the Public Service. 

7. (1) With respect to the elective members of the Board the following provisions 
shall apply: 

(ay A ballot of the members of the Post and Telegraph Department, and a separate 
ballot of the members of the other Departments, shall be taken on the first Monday in 
July, nineteen hundred and eight, and on the first Monday in March in every third 
year thereafter. 

(6) Every ballot shall be taken in manner prescribed by regulations; and if any 
question arises as to the regularity or validity of any ballot, or the voting thereat, such 
question shall be determined by the Minister of Internal Affairs, whose decision shall 
be final. 

(c) If any such member of the Board dies, or by notice in writing addressed to the 
permanent head of the Department of Internal Affairs resigns his office, or ceases to be 
a member of the Public Service, then and in any such case his seat shall become vacant. 

(d) Such vacancy shall be filled by election by a ballot of the members of the De¬ 
partment or Departments represented by the vacating member; but the person so 

35885—S. Doc. 290, 61-2-17* 257 


“258 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


elected shall hold office only for the residue of the period during which his predecessor 
would have held the same if he had remained a member of the Board: 

Provided that where such vacancy arises within three months before the ordinary 
election, a ballot shall not be taken, but in lieu thereof the Governor may appoint to 
such vacancy any member of the Department or Departments represented by the va¬ 
cating member. 

(2) Notice of the election or appointment of every member of the Board shall be 
gazetted, and such gazetting shall be conclusive evidence of the validity of every such 
election or appointment. 

(3) The members to be appointed by the Governor in Council may be appointed at 
any time after the coming into operation of this Act and they, together with the Min¬ 
ister, may, until the first election of the elective members, exercise all the powers and 
functions of the Board. 

8. With respect to the procedure of the Board the following provisions shall apply: 

(а) The Minister shall be chairman at all meetings at which he is present, and in his 
absence the Board shall elect some other member to be chairman. 

(б) Five members of the Board shall form a quorum. 

(c) Subject to the provisions of this Act and the regulations made thereunder, the 
Board may regulate its own proceedings. 

9. The Governor may from time to time appoint some person to be Secretary of the 
Board, and such person may hold the office of Secretary in conjunction with any other 
office which the Governor deems to be not incompatible therewith, and shall receive, 
out of moneys to be appropriated by Parliament, such salary as the Governor from time 
to time determines. 

CONTRIBUTORS. 

10. (1) Every person who on the coming into operation of this Act is permanently 
employed in any capacity in the Public Service, and every person who on the coming 
into operation of this Act is employed in any Department, and has been continuously 
employed in any one or more Departments for a period of five years or more, may at 
any time within six months after the coming into operation of this Act, by notice in 
writing to the Secretary of the Board, elect to become a contributor to the fund. 

(2) If he so elects, he shall as from the date of his election be a contributor, and en¬ 
titled to all the benefits of the fund, subject to the provisions of this Act. 

(3) If he does not so elect, he shall not at any future time become a contributor to 
the fund or participate in its benefits, except on payment of a sum computed in the 
manner prescribed by regulations, and on such conditions as the Board, having due 
regard to the interests of the fund, determines; but he shall continue to be entitled 
to any rights to which but for the passing of this Act he would have been entitled. 

(4) Every person who does not elect to become a contributor, and who has hitherto 
had a deduction made from his salary under the Civil Service Reform Act, 1886, the 
Post and Telegraph Classification and Regulation Act, 1890, or the Civil Service Insur¬ 
ance Act, 1893, shall continue to pay such deduction as heretofore. 

11. (1) All persons who are first permanently employed in any capacity in the 
Public Service after the coming into operation of this Act shall be contributors to the 
fund, and the provisions of the Post and Telegraph Classification and Regulation Act, 
1890, relating to deductions from salaries, and the Civil Service Insurance Act, 1893, 
shall not apply to such contributors. 

(2) Every person who on the coming into operation of this Act is temporarily 
employed in any capacity in the Public Service may, at any time within six months 
after having completed five years’ continuous service in any one or more Departments, 
elect, by notice in writing to the Secretary of the Board, to become a contributor to 
the fund. If he so elects he shall, as from.the date of his election, be a contributor 
entitled to all the benefits of the fund, subject to the provisions of this Act. 

12. (1) The contribution from contributors shall in each case be the following per¬ 
centage of the salary of each contributor respectively, and shall be deducted from the 
contributor’s salary as it becomes payable from time to time, that is to say— 

(а) Five per centum if his age does not exceed thirty years at the time when the 
first contribution becomes payable; 

(б) Six per centum if his age then exceeds thirty years but does not exceed thirty- 
five years; 

(c) Seven per centum if his age then exceeds thirty-five years but does not exceed 
forty years; 

( d ) Eight per centum if his age then exceeds forty years but does not exceed forty- 
five years; 

(e) Nine per centum if his age then exceeds forty-five years but does not exceed 
fifty years; and 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


259 


(/) Ten per centum if his age then exceeds fifty years. 

(2) The amount so deducted shall forthwith be paid by the Minister of Finance to 
the Public Trustee to the credit of the fund. 

(3) For the purposes of this section a contributor’s age shall be deemed to exceed 
thirty years on and after the thirtieth anniversary of his birth, and the other ages 
mentioned in this section shall be calculated respectively in the same manner. 

13. If the salary of a contributor is for any period temporarily stopped on the ground 
of ill health, or if for any period a contributor is on leave of absence without salary, he 
shall during such period continue to contribute to the fund in such manner and to 
such extent as may be prescribed by regulations. 

14. (1) When any person who has had or is liable to have any part of his salary 
deducted under the Civil Service Reform Act, 1886, or the Post and Telegraph Classi¬ 
fication and Regulation Act, 1890, becomes a contributor, such deduction shall there¬ 
upon cease, and the amount in the hands of the Public Trustee to his credit by virtue 
of either of such Acts shall be vested independently of the fund for the benefit of the 
contributor and shall, on his retirement or death, be paid as provided by such Act, in 
addition to the benefits to which he is entitled under this Act. 

(2) When any person w T ho has effected a policy on his life under the Civil Service 
Insurance Act, 1893, becomes a contributor, he shall be entitled at his option— 

(a) To keep the policy alive independently of this Act; or 

(b) To surrender the policy and have the surrender value thereof paid to the Public 
Trustee to be invested independently of the fund, and to be paid, together with all 
interest accrued thereon, to the contributor on his retirement, or to his personal 
representatives on his death; or 

(c) To surrender the policy and to receive the equivalent of its surrender value 
in the form of a paid-up policy, following the terms and conditions of the surrendered 
policy, or such other terms and conditions as may be mutually agreed upon between 
the policy-holder and the Government Insurance Commissioner. 

(3) The option conferred by the last preceding subsection may be exercised by the 
policy-holder at any time after he becomes a contributor. 

(4) The Governor in Council may at any time direct that the whole or any part 
of the money standing to the credit of any contributor under subsections one and two 
of this section shall be paid to such contributor. 

15. When any person who is entitled under the Civil Service Act, 1866, to receive 
compensation for loss of office becomes a contributor, the following provisions shall 
apply: 

(a) Save in the manner and to the extent hereinafter in this section stated, his 
right to such compensation shall not be taken away or affected, but shall be cumulative 
with his right to payment from the fund. 

( b) Such compensation shall be calculated only in respect of the period of his 
employment up to the time when he became a contributor and in respect of his salary 
at the time when he became a contributor. 

(c) If on his retirement from the Public Service he receives and accepts a retiring 
allowance from the fund, he shall thereby forfeit his right to such compensation. He 
shall be deemed to have received and accepted a retiring-allowance when he has 
received and accepted his first installment thereof. 

( d) If on his retirement from the Public Service he receives and accepts such com¬ 
pensation, he shall forfeit his right to a retiring-allowance from the fund, and no 
annuity or periodical payment shall be payable out of the fund on his death; but the 
acceptance of such compensation shall not affect his right to a return of the contribu¬ 
tions made by him to the fund, or, in case of his death, the right of any other person 
to a return of such contributions. 

(e) If after he has retired from the Public Service he dies before he has received 
and accepted either a retiring-allowance from the fund or compensation under the 
said Act, such compensation (if any) shall be payable to his personal representatives, 
and no moneys shall be payable out of the fund except the amount of his contributions. 

(/) Notwithstanding anything hereinbefore contained, if a contributor who has 
received and accepted a retiring-allowance dies before the amount paid to him in 
respect to such allowance is equal to the aggregate amount of the compensation to 
which he was so entitled and his contributions to the fund, the difference between 
the said amounts shall be payable out of the fund to and on behalf of the persons 
entitled, under the provisions of sections twenty-five and twenty-six of this Act, to 
the balance (if any) of his contributions to the fund. 

16. If any dispute arises as to whether any person is a member of the Public Service 
within the meaning of this Act, or as to whether any person is, or is entitled or bound 
to become, a contributor to the fund, or as to the length of service of any contributor, 
such dispute shall be determined by the Board, and the determination of the Board 
shall be final and conclusive. 


260 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


BENEFITS OF THE FUND. 

17. The fund shall be held and applied for the benefit of the contributors in the 
manner and subject to the conditions hereinafter set forth. 

18. (1) Every male contributor whose length of service is not less than forty years 
or whose age is not less than sixty-five years, and every female contributor whose 
length of service is not less than thirty years or whose age is not less than fifty-five 
years, may at any time retire from the Public Service at the expiration of three months’ 
notice of his or her intention so to do, and shall thereupon be entitled to receive from 
the fund an annual retiring-allowance for the rest of his or her life, computed as follows: 

For every year of service such contributor shall receive one-sixtieth part of his or 
her annual salary, but in no case shall the retiring-allowance exceed two-thirds of such 
salary: 

Provided that the Minister in charge of the Department in which a contributor is 
employed may extend the provisions of this section to any case in which the age of a 
male contributor is not less than sixty years or the age of a female contributor is not 
less than fifty years. 

(2) In the last preceding subsection the term ‘‘service” means— 

(a) In the case of an original contributor, continuous employment in the service of 
the Government up to the date of the contributor’s retirement, whether permanent 
or temporary, and whether before or after the date at which he becomes a contributor, 
and whether in the Public Service or in any one or more of the other branches of the 
Government service; and 

( b ) In the case of a contributor who is not an original contributor continuous em¬ 
ployment in the Public Service from the date at which he becomes a contributor up 
to the date of his retirement. 

(3) For the purposes of this section the Government service shall be deemed to 
include the service of any Provincial Government and the service of the New Zealand 
Railway Commissioners. 

(4) The term ‘ ‘ original contributor ’ ’ means a person who becomes a contributor 
under the provisions of section ten hereof. 

19. (1) Every contributor who, with the consent or by the direction of the Minister, 
retires from the Public Service on the ground of being medically unfit for further 
duty shall on his retirement be entitled to receive from the fund a retiring-allowance 
for the rest of his life, computed as mentioned in the last preceding section. 

(2) In the case of a retiring-allowance being granted on the ground of the contribu¬ 
tor being medically unfit for further duty, such retiring-allowance, or any one or 
more installments thereof, may be forfeited by the Board if the contributor fails at any 
time to submit himself for further medical examination when required by the Board, 
or if, being reported on such examination to be medically fit to return to duty, the 
contributor fails to do so when required by the Minister in charge of the Department 
from which he retired; but this subsection shall not apply to any male contributor 
after he has attained the age of sixty-five years, or to any female contributor after she 
has attained the age of fifty-five years. 

(3) For the purposes of this Act a contributor shall be deemed to be medically 
unfit for further duty if on the certificate of at least two medical practitioners approved 
by the Board it is established to the satisfaction of the Board that by reason of mental 
or bodily infirmity, not caused by irregular or intemperate habits, such contributor 
has become permanently unable to perform his duties. 

20. (1) If any contributor who has retired from the Public Service on a retiring- 
allowance is permanently reappointed to the Public Service, his retiring-allowance 
shall thereupon cease to be payable, and he shall again become a contributor to the 
fund; and if he subsequently retires from the said service his retiring-allowance shall 
be calculated separately in respect of his two successive periods of service and of the 
salary received by him in each of such periods. 

(2) When in any other case than that provided for by the last preceding subsection 
a contributor returns to duty while in receipt of a retiring-allowance, or receives pay¬ 
ment for services rendered by him to or for any branch of the Government service 
while in receipt of a retiring-allowance, then no more of such retiring-allowance shall 
be paid than is equivalent, when added to the remuneration so received by him in 
any one year, to his annual salary at the date of his retirement. 

21. A contributor may on his retirement, or at any time before accepting the first 
installment of his retiring-allowance, elect to accept a sum equal to the total amount 
of his contributions to the fund in lieu of his retiring-allowance, in which case he 
shall be entitled to receive such sum accordingly without interest, but no further sum 
shall be payable out of the fund in the event of his death. 

22. For the purpose of computing the retiring-allowance to be granted to a con¬ 
tributor, his salary shall be deemed to be the average rate of salary received by him 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 261 

during the three years next preceding his retirement, or if his service has not con¬ 
tinued for three years, then during the period of his service: 

Provided that where by reason of the age or infirmity of a contributor his salary has 
been reduced, or he has been transferred to a position inferior to that which he pre¬ 
viously occupied, his retiring-allowance shall be computed on the average rate of 
salary received by him during the three years next preceding such reduction or transfer. 

23. A retiring allowance shall be paid by equal monthly installments, the first 
installment being payable one month after the date of the contributor’s retirement. 

24. If any contributor voluntarily retires from the Public Service before becoming 
entitled to a retiring allowance under this Act, or if his services are dispensed with 
from any cause, he shall be entitled to a refund of the whole amount actually con¬ 
tributed by him to the fund, but without interest. 

25. If any male contributor dies, whether before or after becoming entitled to a 
retiring allowance, the following provisions shall apply: 

(а) If he leaves a wife surviving him, there shall be paid out of the fund to the 
widow, at her election, either (i) an annuity of eighteen pounds during her widowhood; 
or (ii) the amount of the deceased contributor’s contributions to the fund, less any 
sums received by him from the fund in his lifetime. 

(б) Any such election by the widow shall be final, and shall be deemed to be made 
when the first payment from the fund is received and accepted by her. 

(c) If the said contributor leaves a child or children under the age of fourteen years, 
there shall be paid out of the fund to or on behalf of each such child the sum of five 
shillings a week until such child attains the age of fourteen years. 

(d) If the said contributor leaves no widow, the amount of his contributions to the 
fund, less any sums which he has received out of the fund in his lifetime, and less any 
sums which have been paid or may become payable in the future to or on behalf of 
any child or children under the age of fourteen years under the foregoing provisions, 
shall be paid to the personal representatives of the deceased contributor in trust for 
the persons entitled thereto under his will, or, in case of intestacy, for the next of kin 
or other persons entitled to his estate under the Statutes of Distribution. 

26. When any female contributor dies, whether before or after becoming entitled to 
a retiring allowance, the following provisions shall apply: 

(а) If she leaves a child or children under the age of fourteen years, there shall be 
paid out of the fund to or on behalf of each such child the sum of five shillings a week 
until such child attains the age of fourteen years. 

(б) The amount of the contributions of such deceased contributor, less any sums 
which she has received out of the fund in her lifetime, and less any sums which have 
been paid or may become payable in the future to or on behalf of any child under the 
age of fourteen years under the foregoing provisions of this section, shall be paid to 
her personal representative in trust for the persons entitled thereto under her will, or, 
in case of her intestacy, for the next of kin or other persons entitled to her estate under 
the Statutes of Distribution. 

27. (1) Any moneys payable out of the fund under either of the two last preceding 
sections to or on behalf of a child under the age of fourteen may, at the discretion of 
the Board, be either paid to the child himself or expended by the Board for the benefit 
of the child, or paid to the Public Trustee or any other person, to be expended on 
behalf of the child in such manner as the Public Trustee or such other person thinks fit. 

(2) Any moneys payable out of the fund under either of the two last preceding 
sections to the personal representatives of a deceased contributor may, if no grant of 
probate or letters of administration is obtained within three months after the death 
of the contributor, be paid to the Public Trustee in trust for the persons beneficially 
entitled thereto under this Act. 

28. When compensation is paid by the Crown or any Government Department 
under the provisions of the Workers’ Compensation for Accidents Act, 1900, or any 
Act amending or substituted for that Act, in respect of an accident to a contributor, 
the following provisions shall apply: 

(а) When such compensation is paid to the contributor in respect of an accident by 
which he has become medically unfit for further duty, all moneys so received by him, 
whether by way of a weekly payment or otherwise, shall to the extent thereof be 
deemed to be received in satisfaction of his retiring allowance under this Act, and such 
allowance shall be reduced or postponed accordingly in such manner as the Board 
directs. 

(б) When any such compensation has been received in respect of the death of a 
contributor by any person entitled under this Act to receive any annuity or peri¬ 
odical payment in consequence of such death, the compensation so received by that 
person shall to the extent thereof be deemed to be received in satisfaction of such 
annuity or periodical payment, and the same shall be reduced or postponed accord¬ 
ingly in such manner as the Board directs. 


262 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


(c) No such compensation shall take away or affect the right of a contributor or any 
other person to receive from the fund under the provisions of this Act the amount of 
the contributions made to the fund by a contributor. 

29. In no case shall any retiring allowance or other moneys granted or payable out 
of the fund to any person be in any way assigned or charged or pass to any other person 
by operation of law; nor shall any moneys payable out of the fund on the death of a 
contributor be assets for the payment of his debts or liabilities. 

MISCELLANEOUS. 

30. (1) Before the first day of April in each year there shall be prepared by the 
Board, in such form as may be prescribed by regulations, a statement of its revenue 
account for the year ended on the thirty-first day of December preceding, and of its 
balance sheet at the close of such year, and a statement of membership and of retiring 
and other allowances at the close of such year. 

(2) Such accounts and statements, accompanied by a report from the Board, after 
being audited by the Audit Office, shall, within ten days after the completion of the 
aud.t, be forwarded by the Board to the Minister of Internal Affairs, who shall within 
ten days after the receipt thereof lay the same before Parliament if then sitting, or 
if not, then within ten days after the commencement of the next ensuing session. 

31. (1) For the period ending on the thirty-first day of December, nineteen hundred 
and ten, and for each triennial period thereafter, an examination of the fund shall be 
made by an actuary appointed by the Governor. 

(2) The actuary shall set forth the result of such examination in a report which 
shall be so prepared as to show the state of the fund at the close of the period, having 
regard to the prospective liabilities and assets and the probable annual sums required 
by the fund to provide the retiring and other allowances falling due within the ensu¬ 
ing three years without affecting or having recourse to the actuarial reserve apper¬ 
taining to the contributors’ contributions. 

(3) The Board shall cause such report to be printed and a copy thereof to be sup¬ 
plied to each contributor. 

(4) A copy of spch report shall, within ten days after it is received, be laid before 
Parliament if then sitting, or if not, then within ten days after the commencement of 
the next ensuing session. 

32. (1) Forthwith after the coming into operation of this Act, and in the month of 
January in every year thereafter, the Minister of Finance shall pay into the fund and 
out of the Consolidated Fund, without further appropriation than this Act, the sum 
of twenty thousand pounds, together with such further amount (if any) as is deemed 
by the Governor in Council, in accordance with the aforesaid report of the actuary, 
to be required to meet the charges on the fund during the ensuing year. 

(2) A statement of all additional amounts so paid into the fund shall be laid before 
Parliament within ten days after the payment thereof if Parliament is then sitting, 
or, if not, then within ten days after the commencement of the next ensuing session. 

33. (1) Fines which, pursuant to any Act or regulations relating to the Public 
Service, would but for the passing of this Act be payable to any other fund shall here¬ 
after be paid into the Public Service Superannuation Fund and shall form part thereof. 

(2) Nothing in this section shall apply to any fines payable into the Police Provident 
Fund or the Government Railways Superannuation Fund. 

34. The Governor may from time to time, by Order in Council gazetted, make such 
regulations as he thinks necessary for any of the following purposes: 

(а) Prescribing the manner in which elections shall be conducted, and the facilities 
to be given to members of the Public Service for voting thereat, and to the members 
of the Board for attending meetings thereof; 

(б) Prescribing the powers, functions, and procedure of the Board with respect to 
the fund; 

(c) Prescribing the mode of investment of moneys belonging to the fund; and 

( d) Generally prescribing whatever else he thinks necessary in order to give full 
effect to this Act. 

35. The provisions of this Act shall not apply to the following persons: 

(a) Members of the General Assembly or Ministers of the Crown: 

(b) Any Judge of the Supreme Court or of the Court of Arbitration: 

(c) The High Commissioner: 

( d ) Any person entitled under any Act to receive a pension on his retirement from 
the Public Service: 

( e ) Any person who is remunerated by fees or commission and not by wages or 
salary: 

(/) Members of the Defence Forces, except theJPermanent Militia and other persons 
permanently employed in the said forces: 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


263 


(g) Any person who is appointed to any place or office which the Governor has by 
Order in Council at or before the time of such appointment declared not to be subject 
to the provisions of this Act. 

OTHER SUPERANNUATION FUNDS. 

36. When prior to the coming into operation of this Act any person has been trans¬ 
ferred from the Public Service to the service of the New Zealand Railway Commis¬ 
sioners or to the Government Railways Department, and has served continuously in 
the Public Service and that service or Department, then, for the purpose of computing 
his retiring-allowance under the Government Railways Superannuation Fund Act, 
1902, such service shall be deemed to be service in that Department within the meaning 
of that Act. 

37. Any contributor to the Police Provident Fund, the Government Railways 
Superannuation Fund, the Teachers’ Superannuation Fund, or the Public Service 
Superannuation Fund who is after the passing of this Act transferred from one branch 
of the Government service to another shall continue as a contributor to the fund which 
he originally joined, and shall be entitled to the benefits accruing thereunder in the 
same manner as if no such transfer had taken place. 

38. Every person who after the passing of this Act becomes a contributor to the 
Police Provident Fund or the Government Railways Superannuation Fund shall con¬ 
tribute to such fund at the same rate as that provided for by section twelve of this Act. 

39. Section eleven of the Appropriation Act, 1887, is hereby repealed as from the 
first day of April, nineteen hundred and eight; and, in the case of any person who 
retires from the Civil Service after that date, any superannuation allowance to which 
he is entitled under the Civil Service Act, 1866, shall be calculated in the same manner 
as if the said section had not been passed. 

SPECIAL PROVISION AS TO THE POLICE FORCE. 

40. (1) On a day to be fixed by the Minister of Justice (being not later than six 
months from the coming into operation of this Act) a ballot shall be taken of the con¬ 
tributors to the Police Provident Fund on the proposal that such contributors shall 
become contributors to the fund established under this Act in lieu of the first-men¬ 
tioned fund. 

(2) The ballot shall be taken in such manner as the said Minister directs. 

(3) If the result of the ballot is that a majority of the votes recorded thereat are in 
favor of the proposal, then, as from a date to be fixed by the Governor by notice in the 
Gazette , the following provisions shall apply: 

(a) The Police Provident Fund shall be abolished, and the amount then standing 
to its credit shall be paid by the Public Trustee into the fund established under this 
«A.ct 

(b) All contributors to the Police Provident Fund shall be deemed to be contribu¬ 
tors to the fund established under this Act, and shall thereafter contribute thereto at 
the rate prescribed by this Act for the age of each such contributor at the date when 
his first contribution became payable under the Police Provident Fund Act, 1899. 

(c) All retiring and other allowances then payable under the last-mentioned Act 
shall from time to time be payable out of the Public Service Superannuation Fund. 

(d) The Police Force shall become part of the Public Service within the meaning 
of this Act, and the provisions of this Act shall apply thereto accordingly. 

{e) One person to be elected by the members of the Police force from among their 
number shall be added to the Public Service Superannuation Board, which shall there¬ 
after consist of eleven persons, and the provisions of section seven of this Act shall 
apply, mutatis mutandis, to any such election, save that the first election shall take 
place on a day to be determined by the Minister of Justice. 

SPECIAL PROVISION FOR EMPLOYEES OF THE WELLINGTON AND MANAWATU RAILWAY 

COMPANY. 

41. (1) The Minister for Railways may at any time, by notice in the Gazette , declare 
that the provisions of the Government Railways Superannuation Fund Act, 1902 
(hereinafter referred to as the said Act), shall extend and apply to persons employed 
by the Wellington and Manawatu Railway Company (Limited); and, subject to the 
provisions of this section, such provisions shall be extended and apply accordingly as 
from a date to be fixed by the Minister in such notice. 

(2) Every person who at the date so fixed is permanently employed m any capacity 
by the said company may at any time within six months after that date elect to become 
a contributor to the Government Railways Superannuation Fund, and if he so elects 


264 


CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 


he shall, subject to the provisions of the said Act and of this section, be entitled to 
all the benefits of the said fund in the same manner as if he had first entered the service 
of the Government Railways Department at the time when he so elects: 

Provided that any such person may, if he so desires, pay into the said fund, either 
in one sum or in such payments as may be prescribed by regulations, the amount of 
contributions that would have been payable by him had he become a contributor on 
the first day of January, nineteen hundred and three (the date when the said Act came 
into operation), and in such case the benefits to which he is entitled shall be computed 
as from such last-mentioned date, and the rate of his contributions shall be the same 
as if he had become a contributor to the said fund on that date: 

Provided also that, in consideration of the company paying into the fund by way 
of subsidy either a sum of five thousand pounds or the sum of one thousand pounds 
per annum for a period of five years (which payments the company is hereby authorized 
to make), the benefits accruing to any person in the employ of the company on the 
coming into operation of this Act, and who pays contributions as from the said first 
day of January, nineteen hundred and three, shall be computed on his full period of 
continuous service with the company. 

(3) With respect to persons who after the date fixed by the Minister as aforesaid are 
first permanently employed in any capacity by the said company, it shall be a condi¬ 
tion of their employment that they shall be contributors to the said fund and be 
entitled to its benefits: 

Provided that before entering the company service every such person shall be 
required to pass the medical examination prescribed by the Government Railways 
Department in respect to persons who are entering the Government Railway service, 
and such examination shall be made by the Government Railway Medical Officer at 
the expense of the company. 

(4) The said company shall from time to time, when requested by the Minister for 
Railways, furnish him with such information respecting the names of persons in its 
employ, their age, length of service, and otherwise, as he may require. 

(5) The Governor may from time to time, by Order in Council gazetted, make such 
regulations as may be necessary for the carrying out of this section. 


o 


LB D ’10 























































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